Report on Corporate Governance in Denmark

December 2003

Report onCorporate Governancein Denmark– the Copenhagen Stock Exchange Committee on Corporate Governance

REPORT ON CORPORATE GOVERNANCE IN DENMARK

Foreword 2

1 Introduction 3

2 Copenhagen Stock Exchange Committee on CorporateGovernance 4

2.1 Terms of reference for the Copenhagen Stock ExchangeCommittee on Corporate Governance 4

2.2 This report takes stock of the work of the Copenhagen StockExchange Committee on Corporate Governance 5

3 Experience of corporate governance in Denmark 63.1 Reception of and reaction to the Nørby Committee’s

recommendations 63.2 Questionnaire study conducted by the Copenhagen Stock

Exchange Committee on Corporate Governance 73.3 Companies’ opinion on corporate governance in the

annual reports 93.4 Other consequences of the Nørby Committee’s report 113.5 Summary 12

4 International corporate governance initiatives 134.1 US initiatives 134.2 EU initiatives 134.3 National initiatives abroad 144.4 Summary 15

5 The need for a revision of the Nørby Committee’srecommendations 16

6 Considerations for future work in the light of the pastdevelopment in this area 19

7 Proposal for revised recommendations 20

Appendix 1 26

Appendix 2 36F

Contents

REPORT ON CORPORATE GOVERNANCE IN DENMARK 2

This report has been prepared by the Copenhagen Stock Ex-change Committee on Corporate Governance (the Committee) onthe basis of the work on corporate governance undertaken by theCommittee since its appointment in November 2002.

The Committee invites stakeholders to comment on the subjectsmentioned in section 5 of the report and on the proposal for re-vised recommendations presented by the Committee in section 7of the report. Appendix 1 gives an outline of the Committee’sproposal for a revision of the existing recommendations.

The comments received by the Committee will form part of thecontinued work on corporate governance in Denmark.

The Committee must receive the comments by 1 April 2004 by e-mail to [email protected] or by letter to the Copenha-gen Stock Exchange, Nikolaj Plads 6, Postboks 1040, DK-1007Copenhagen K, if the comments are to be taken into considera-tion.

December 2003

Foreword


The debate on corporate governance has been going on for anumber of years in the majority of countries in the western world.However, the debate has heated up in recent years, one reasonbeing the collapse of American and other international companies.

In Denmark, the debate on corporate governance really gatheredmomentum following the publication of The Nørby Committee’sReport on Corporate Governance in Denmark – Recommenda-tions for Corporate Governance in Denmark in December 2001.This meant that Denmark joined the large group of countries with avoluntary (i.e. not legally binding) code of conduct for what may beregarded as corporate governance.

Prior to the publication of the Nørby Committee’s report, the ex-tensive international debate on corporate governance had causedorganisations, stock exchanges, etc., in a number of countries toadopt codes of conduct. After the publication of the report, focuson control, transparency and independence increased.

The Nørby Committee was appointed in March 2001 by the thenminister for economic and business affairs on account of the gov-ernment’s wish to strengthen the board culture in Danish compa-nies as stated in the then government’s business strategy knownas .dk21. The initiative behind the Danish code of conduct wasseized due to the government’s visions for risk-taking Denmarkand not in response to corporate scandals.

Members of the committee were Lars Nørby Johansen (chairman),Jørgen Lindegaard, Waldemar Schmidt and Mads Øvlisen. Thecommittee was asked to assess whether there was a need forrecommendations for corporate governance in Denmark and, if so,to present a proposal for such recommendations. The report oncorporate governance in Denmark was the result of the commit-tee’s work.

The Copenhagen Stock Exchange incorporated the Nørby Com-mittee’s recommendations in its disclosure requirements for listedcompanies immediately after the publication of the report.

Hence, the Copenhagen Stock Exchange recommends listedcompanies to address the Nørby Committee’s recommendationsfor corporate governance in their annual reports.

In order to ensure a continuation of the work carried out and thedebate on corporate governance, the Copenhagen Stock Ex-change appointed an independent corporate governance commit-tee in November 2002 to work towards facilitating the developmentof corporate governance in listed Danish companies.

Introduction


At the request of the then ministry of economic and businessaffairs, the Nørby Committee considered what incentives mightcontribute most to compliance with corporate governance bysupervisory and executive boards in Danish companies.

The Nørby Committee established that subsequent embeddingand update of the recommendations for corporate governancewere important as the recommendations were not a static tool, buta tool that should be continuously adapted to the current situation.

The Nørby Committee therefore encouraged the supervisoryboard of the Copenhagen Stock Exchange to consider how itcould contribute to making the recommendations pave the way forcorporate governance in listed Danish companies. The NørbyCommittee also proposed that regular assessments and revisions(when needed) be made of the contents of the recommendations.

At the publication of the Nørby Committee’s recommendations, theCopenhagen Stock Exchange was, and still is, of the opinion thatcorporate governance in listed companies is very important also tothe Copenhagen Stock Exchange and that the stance on corpo-rate governance of the management of a listed company shouldbe known by the general public.

Hence, the Copenhagen Stock Exchange supported the workinitiated by the appointment of the Nørby Committee and aiming atestablishing a common frame of reference for corporate govern-ance in Denmark. The committee’s recommendations could serveas inspiration when companies address corporate governance.

It seemed natural for the Copenhagen Stock Exchange to continuethe Nørby Committee’s work and embed the work on corporategovernance by appointing a committee on corporate governance.

The Committee was composed so as to include a broader group ofpeople than the Nørby Committee. Furthermore, ensuring thecontinuity of the Nørby Committee was important. The followingpersons are members of the Copenhagen Stock Exchange Com-mittee on Corporate Governance:

Lars Nørby Johansen (chairman)President and CEO of Group 4 Falck A/S

Mads ØvlisenChairman of the supervisory board of Novo Nordisk A/S

Sten ScheibyeCEO of Coloplast A/S

Peter L. RavnCEO of SimCorp A/S

Finn L. MeyerState-authorised public accountant and senior partner of KPMG

Henrik StenbjerreAttorney and partner of Kromann Reumert

Lars RohdeCEO of ATP

This composition made it possible to combine views of, experiencegathered by and knowledge of companies, investors, auditors andadvisers.

2.1 Terms of reference for the Copenhagen Stock ExchangeCommittee on Corporate Governance

The Copenhagen Stock Exchange Committee on Corporate Gov-ernance was appointed to ensure the continued development of amanagement culture and management structures in listed compa-nies. The composition of the Committee was essential – not leastin the light that the recommendations for corporate governanceshould not be a static frame of reference, but should be continu-ously adapted to the current situation.

The Copenhagen Stock Exchange’s supervisory board chargedthe Committee with monitoring the development of corporategovernance in the interaction between company managements,shareholders, investors and other stakeholders.

On the basis of the framework laid down in the Nørby Committee’sreport, including its recommendations for corporate governancethat the Copenhagen Stock Exchange recommends listed compa-nies to address in their annual reports, the Committee was alsocharged with:

• monitoring the development of the requirements generally gov-erning corporate governance;• collecting the companies’ views and experience existing in rela-tion to their work on the recommendations; and• assessing the need for revising the Nørby Committee’s recom-mendations for corporate governance.

Furthermore, the terms of reference also stipulated that the con-tinued existence of the Committee, its tasks and compositionshould be reviewed again in late 2003.

The Committee based its work on the Nørby Committee’s defini-tion of the concept of corporate governance. According to thedefinition, corporate governance is defined as:

2 Copenhagen Stock Exchange Committee on corporate governance


2.2 This report takes stock of the work of the CopenhagenStock Exchange Committee on Corporate Governance

Thanks to the terms of reference and the fact that the Committeewas appointed by the Copenhagen Stock Exchange, the Commit-tee has been able to concentrate its work on the development ofcorporate governance in listed companies.

The Nørby Committee’s report served as the foundation for thework undertaken by the Copenhagen Stock Exchange Committeeon Corporate Governance.

Thus, the Committee’s task was not to draw up an entirely new setof recommendations, but rather to revise and build on the existingrecommendations of the Nørby Committee’s report.

The work of the Committee is to ensure that the existing recom-mendations are up-to-date, effective and in keeping with bothnational and international trends.

The Committee regarded its task as being divided into a nationaland an international part, which together provide the foundation forassessing the need for revising the Nørby Committee’s recom-mendations for corporate governance.

On the national scale, the Committee collected companies’ viewson and experience of the recommendations.

The Committee conducted a questionnaire study among listedcompanies to obtain as much information as possible about thecompanies’ views on and experience of the recommendations. Asinvestors’ views on corporate governance are also of significanceto the implementation of corporate governance in companies, theCommittee also conducted a questionnaire study among a selectgroup of investors – major shareholders in companies listed on theCopenhagen Stock Exchange.

In this report, the Committee, above all, sheds light on the devel-opment of corporate governance in Denmark since the publicationof the Nørby Committee’s recommendations and on their effect inthe eyes of the Committee. Moreover, on the basis of the compa-nies’ annual reports and other published information, this report

also takes stock of how companies have responded to the rec-ommendations and how they have addressed corporate govern-ance.

On the international scale, a number of ongoing changes can beseen in the individual countries’ national codes of conduct as wellas amendments to national legislation governing areas of impor-tance to corporate governance.

Much has happened since the publication of the Nørby Commit-tee’s report within the EU in direct relation to corporate govern-ance. Most important is the European Commission’s action plan ofMay 2003 to modernise company law and enhance corporategovernance in Europe.

This report outlines the primary trends in the general debate at theinternational level and the development of the most importantforeign codes of conduct since the publication of the Nørby Com-mittee’s report. The main lines of action within the EU are alsooutlined.

The Committee has assessed the need for revising the NørbyCommittee’s recommendations for corporate governance againstthe background of a total assessment of factors that each in theirown way influences the opinion on corporate governance in Den-mark.

The Committee members’ own experience and knowledge havealso been a material element in the assessment of the need forrevising the recommendations.

In its report, the Committee points out a number of areas where itbelieves there may be a need for revision or elaboration of theexisting recommendations and how this could take place. TheCommittee also points out a number of areas where it has dis-cussed the need for change, but where the Committee has notmade any proposal. In section 7, the Committee presents its pro-posal for revised recommendations.

The Committee is an independent committee appointed by thesupervisory board of the Copenhagen Stock Exchange. Its mem-bers exclusively represent themselves and their own opinions.None of the members represent an organisation, a trade associa-tion or other.

The goals according to which a company is managed and the generalprinciples and framework regulating the interaction between the com-pany’s managerial bodies, the owners as well as other parties directlyinfluenced by the company’s transactions and business (in this contextjointly referred to as the company’s stakeholders). Stakeholders alsoinclude employees, creditors, suppliers, customers and the local com-munity.


Corporate governance has a broader aim than shareholder value,i.e. the question about whether the management is actually striv-ing to optimise shareholder interests. Hence, corporate govern-ance deals with the goals according to which a company is man-aged and the general principles and framework regulating theinteraction between the company’s managerial bodies, the ownersas well as other stakeholders.

The preparation and publication of the Nørby Committee’s reportmeant that Denmark – like a number of other countries – intro-duced a voluntary set of recommendations for corporate govern-ance. The report paved the way for a systematic framework for thedebate on corporate governance and the contents of the conceptinstead of a sporadic discussion about subjects related to corpo-rate governance.

It was interesting to see after the publication of the Nørby Com-mittee’s report how the recommendations were received by thesurrounding world, including companies, investors and otherstakeholders. The question was whether the stakeholders in gen-eral would adopt the recommendations as a common frame ofreference and how the individual companies would respond to it.

3.1 Reception of and reaction to the Nørby Committee’srecommendations

The Nørby Committee published its report on 6 December 2001.On the same day, the Copenhagen Stock Exchange announcedthat it would incorporate the recommendations in its disclosurerequirements for issuers of shares listed on the CopenhagenStock Exchange. This means that the Copenhagen Stock Ex-change now recommends listed companies to address corporategovernance in their annual reports as expressed in the NørbyCommittee’s recommendations.

The recommendations for corporate governance came into exis-tence as non-binding recommendations – i.e. soft law – as was thecase in the far majority of other countries with similar rules oncorporate governance. From the outset, there were objections tothis kind of “indirect legislation” as some parties called it. It wasthus claimed that there was a risk that the non-binding recommen-dations over time would be converted into legislation or automati-cally be given binding effect through the courts’ application of law.

The Nørby Committee was aware of this problem and believedthat the purpose of the recommendations – establishment of cor-porate governance through voluntariness and flexibility – must bethe decisive argument in favour of the recommendations main-taining their non-binding nature.1

1 Stated on page 45 in the Nørby Committee’s report, where the applicationof soft law is also described.

The incorporation of the recommendations in the CopenhagenStock Exchange’s disclosure requirements does not mean that thebinding effect of the recommendations is any greater. The Copen-hagen Stock Exchange recommends companies to address corpo-rate governance as reflected in the recommendations. This mayinclude the different ways in which the companies are organised.

The Copenhagen Stock Exchange’s recommendation is based onexpectations of a valid rationale behind each company’s way toarrange its management, and this must be a reasonable assump-tion for listed companies. It is this rationale that it is relevant tohighlight in the company’s communication with the market. Thisallows the individual investor to decide whether the investor isconfident that the management of the individual company hasorganised the company and arranged the management in anexpedient manner.

What is essential is that the relevant aspects of the company aretransparent.

Some quarters criticised the Nørby Committee’s recommendationsfor being too specific and too rigorous.

The Nørby Committee indicated that it considered it to be of ut-most importance that the recommendations were operational tocreate a practical tool as a basis for discussions about corporategovernance. Hence, the committee would help stimulate the proc-esses in the companies consisting of serious work on and deci-sion-making regarding questions related to corporate governance.

The Nørby Committee also intended to make the recommenda-tions flexible so as to give the individual companies a real oppor-tunity to apply the recommendations as a tool. This flexible ap-proach is a must as what can be said to be corporate governancefor a specific company differs in many areas from company tocompany.

In the opinion of the Nørby Committee, the combination of thedegree of specification, the flexible nature and the voluntariness ofthe recommendations should lay the foundation for a dialogue andfruitful discussions in the companies.

As the use of the recommendations is voluntary, it is up to eachcompany to determine the extent to which it will follow them. In thisway, the difference between supervisory boards and betweencompanies is respected. In the end, it is left to the market to as-sess which companies observe what is deemed corporate govern-ance by the market.

The Nørby Committee found that the market is the best judge ofthat. However, if the market is to assess these matters, the com-panies’ stance must be transparent.

3 Experience of corporate governance in Denmark


3.2 Questionnaire study conducted by the CopenhagenStock Exchange Committee on Corporate Governance

Background to the studyCollecting experience and views among managements in listedcompanies was an important element in the Committee’s work.This is an important contribution to the assessment of the effectsof the Nørby Committee’s recommendations and thus also of theneed for any revision of the recommendations.

Since the publication of the recommendations, many differentviews of and different experience gained by company manage-ments, investors and other stakeholders have regularly beenexpressed in the media, at conferences and otherwise. Thanks toa questionnaire study conducted among listed companies, theCommittee gained a structured idea of company managements’views and experience.

Moreover, investors’ views on corporate governance, the recom-mendations and companies’ work on the recommendations are ofimportance to the Committee’s work. Therefore, the Committeealso conducted a questionnaire study among a group of majorshareholders in the listed companies.

Completion of the studyThe questionnaire study was conducted between January andApril 2003, i.e. at a time when annual reports were being drawn upor had just been published.2

Since corporate governance is an issue requiring commitment onthe part of both the supervisory board and the executive board, thequestionnaire was answered by both the individual company’schairman of the supervisory board and its CEO. The purpose was

2 The results of the study are available at www.corporategovernance.dk.

also to establish whether corporate governance is regarded differ-ently by the two groups.

The managements of the companies and major shareholders wereasked about their general view on corporate governance and howthe work on corporate governance had in fact been undertaken.They were also asked about their opinions on each of the 31recommendations.

The high response rate of the questionnaire study is a clear sign ofthe focus among companies and major shareholders on corporategovernance. Hence, about 60 per cent of the chairmen of thesupervisory boards responded as did some 70 per cent of theCEOs. A small group of those who did not answer the questionssent other written statements of opinion to the Committee. Thesestatements also contributed to the Committee’s overall knowledgeof company views.

Among major shareholders, 92 per cent of the relatively smallgroup of respondents completed the questionnaire.

Results of the studyCompany managements generally held a positive view on therecommendations for corporate governance and the actual workon the recommendations. Thus, the general opinion among man-agements and major shareholders was that corporate governancehelps increase the confidence in and the reliability of a companyand its management, and that it is relevant that company man-agements address corporate governance. The major shareholderswere also of the opinion that the companies’ work on corporategovernance makes them more attractive as an investment object.

Table 1 shows the opinion balance3 for the answers to the generalquestions for each of the three groups of respondents.

3 The opinion balance value weights the percentage ratio of respondentsagreeing to respondents disagreeing about a given question. The value iscalculated by deducting the percentage number of negative answers fromthe percentage number of positive answers. The calculation ignores neutralanswers. The result is stated as a figure between minus 100 and 100 andspecifies the ratio of respondents agreeing to respondents disagreeing. Theresult will thus be 0 if the number of positive answers equals the number ofnegative answers.

Table 1 CEOs Chairmen of Major supervisory boards shareholders

The company’s work on corporate governance …… increases the confidence in and the reliability of the company and its management 84 97 95… raises the insight into management principles and processes 58 72 82… contributes to improving company competitiveness 3 13 36… creates added value for shareholders 47 56 73… helps attract investors / makes the company more attractive as an investment object 63 81 91… contributes to better planning of company strategy 16 26 45… improves the company’s international standing 49 62 91… shifts focus from other important aspects in the company -21 -37 -32


The table shows that the respondents agreed most about thestatement that corporate governance increases the confidence inand the reliability of the company and its management. The re-spondents were most sceptical about whether the work on corpo-rate governance contributes to improving company competitive-ness.

The major shareholders were of the opinion that corporate gov-ernance raises the insight into management principles and proc-esses, while the CEOs were not quite of the same of opinion. Ingeneral, the major shareholders seemed to be more positive thancompany managements.

The Nørby Committee saw it as one of its most important tasks tocreate a common frame of reference for the opinion on corporategovernance. In the questionnaire study, company managementsconfirmed that this had been achieved, and the major sharehold-ers regarded it as positive.

As mentioned earlier, the recommendations were criticised forbeing too specific. Nevertheless, the study revealed that the ma-jority of respondents actually considered the operational andspecific nature of the recommendations to be expedient.

The Committee asked about the relevance of the specific contentsof the recommendations. Both company managements and major

shareholders agreed that the seven main areas of the recommen-dations were relevant to the work on corporate governance.However, they did not agree to the same extent about the ade-quacy of the main areas for the work on corporate governance.This may reflect the numerous ways in which companies areorganised and the fact that they cannot all be lumped together;one set of recommendations cannot take into consideration all theproblems associated with corporate governance that may arise inthe individual companies. And this was not the intention of theNørby Committee.

Overall, the respondents agreed about the contents of the NørbyCommittee’s 31 recommendations. The different ways in whichDanish companies are organised mean that they agree about theindividual recommendations to different degrees.

The questionnaire study demonstrated that company manage-ments and major shareholders find it important that the recom-mendations for corporate governance are voluntary recommenda-tions, and so the legislature should not be the party laying downthe framework for corporate governance. The conclusion is inperfect harmony with the opinion of the Nørby Committee and theCopenhagen Stock Exchange Committee on Corporate Govern-ance. The opinion balance for the two questions appears fromtable 2, and it can be seen that voluntariness is considered moreimportant by the company managements.

Table 2 Chairmen of Major supervisory boards shareholders

It is expedient that the recommendations for corporate governance in Denmark are voluntary recommendations 92 86It should be left with the legislature to lay down the framework for corporate governance -84 -50


There were no noticeable differences between the answers givenby the chairmen of the supervisory boards and the answers givenby the CEOs. In general, the two groups thus held the same opin-ion on corporate governance.

According to the study, major shareholders make use of a com-pany’s description of corporate governance in its annual reportwhen assessing the company’s management. The major share-holders found that the statements on corporate governance by thelisted companies were not quite satisfactory.

The study contributed significantly to increasing the Committee’sknowledge about how the chairmen of the supervisory boards andCEOs of listed companies as well as major shareholders assesscorporate governance in general and how the work on corporategovernance is undertaken in the companies. The questionnairestudy gave the impression that the recommendations served asexcellent inspiration to the companies in their work on corporategovernance and that the recommendations had led to the debatein the individual companies intended by the Nørby Committee.

3.3 Companies’ opinion on corporate governance in theannual reports

The Copenhagen Stock Exchange recommends companies toaddress the Nørby Committee’s recommendations for corporategovernance in their annual reports.

Hence, companies’ annual reports and stock exchange an-nouncements about corporate governance constituted an impor-tant source to the Committee’s collection of information from com-panies about their opinions and work on corporate governance.

The Committee has systematically collected the statements oncorporate governance published by the companies.4

The way in which companies express their views on corporategovernance and its structure reflects a different opinion on andapproach to the issue. What the companies say in their annualreports does not necessarily reflect the quality or the quantity ofthe individual company management’s underlying work on corpo-rate governance.

The statements published by company managements can beanalysed in different ways. The Committee has not seen it as itstask to analyse the quality of the individual statement or the workundertaken by the individual company management.

4 If a company issued a statement on corporate governance in its annualreport or another announcement published through the Copenhagen StockExchange under a heading or by mentioning corporate governance or asimilar concept, these have been collected.

The Copenhagen Stock Exchange’s recommendation is intendedfor annual reports published for financial years having commencedon 1 January 2002 or later. The effect of the recommendation willthus be visible in annual reports published in the spring of 2003 orto be published in future.

However, a number of companies published their opinions oncorporate governance through the Copenhagen Stock Exchangeas early as 2002 – also immediately after the publication of theNørby Committee’s report. In total, 31 per cent of the companieslisted on the Copenhagen Stock Exchange commented on corpo-rate governance in their annual reports or other announcementspublished through the Copenhagen Stock Exchange in 2002.

One hundred and twenty-seven companies, or 72 per cent of thecompanies at present having published annual reports since 1January 2003, have addressed corporate governance in theirannual reports or other stock exchange announcements. Largelyall companies included in the KFX Index have addressed corpo-rate governance, but the percentage is 91 per cent for MidCap+companies and 79 per cent for SmallCap+ companies.

A company’s published opinion on corporate governance may onlybe a brief statement that the company finds that the most impor-tant recommendations of the Nørby Committee’s report are fol-lowed by the management of the company or merely that thecompany’s management holds a positive view on the NørbyCommittee’s initiative. A few companies stated that they werehighly aware of corporate governance – both before and after thepublication of the Nørby Committee’s report. Some 21 per cent ofthe companies opted for this way to express their views on corpo-rate governance.

Other companies provided a detailed (some a very detailed) de-scription of their management structures and views on the recom-mendations of the Nørby Committee and foreign codes of conduct,if any.

Extract from the Copenhagen Stock Exchange’s recommendation“The Copenhagen Stock Exchange encourages companies to addressthe recommendations in their annual reports. They may do so by, forinstance, inserting a separate section thereon in the annual report.Such a section may be a summary or contain an indication of the extentto which the company follows the recommendations and a statementon the reason for any use of other principles or for deviations. Anotherpossibility is that companies – preferably on the basis of the sevenmain areas of the recommendations – provide relevant information inanother way about their corporate governance principles in the annualreport.”

Disclosure requirements for issuer s of shares listed on the Copenha-gen Stock Exchange (rule 36).


A few companies published documents outlining their overallguidelines for corporate governance.

A large proportion of these more extensive statements on corpo-rate governance included the individual company’s view on corpo-rate governance based on the seven main areas outlined in theNørby Committee’s report. This approach was adopted by around37 per cent of the 127 companies. The number of pages allocatedfor this purpose ranged from half a page to 19 pages.

A number of companies addressed all 31 recommendations andused them as a checklist.

In cases where a company addressed corporate governance on alarge number of pages, the company typically did so in a stockexchange announcement instead of the annual report.

Forty-two per cent of the companies addressed corporate govern-ance differently and did not address each of the seven main areas,but still in a way so that the individual company – at least quantita-tively – elaborated on issues of importance to the company.

A few companies stated that they had made a sweeping revisionof their articles of association in the light of the corporate govern-ance principles. However, the far majority only introduced smallrevisions triggered by the recommendations.


The Committee’s review of statements made by the companies oncorporate governance shows that the Nørby Committee’s reportand recommendations have set the direction for the debate oncorporate governance in the companies and for their statements.

All the companies addressing corporate governance in one way orthe other referred to the Nørby Committee’s report or addressedone or more of the recommendations presented in the NørbyCommittee’s report.

Several companies stated that they studied all the Nørby Com-mittee’s recommendations, but did not publish their views on allrecommendations.

A number of the companies stated that their websites containinformation on their approach to corporate governance, includingthe Nørby Committee’s recommendations, or that their websitescontain a more detailed description of their approach to corporategovernance than the one given in their annual reports.

A quick glance at a few of these statements on corporate govern-ance published on the companies’ websites shows that they arerather extensive. One reason is that a number of these documentscontain detailed comments on each recommendation from theNørby Committee. It can be argued that such detailed informationon a company’s approach to corporate governance, including anyof the 31 recommendations, is not suitable for publication in therelevant company’s annual report.

For most companies, this exercise was the first time that theyaddressed corporate governance under a specific heading. TheCommittee believes that each company will assess the right levelfor the company on an ongoing basis.

When companies address corporate governance in their nextannual reports, they are expected to follow up the intentions previ-ously made for corporate governance. The individual companiesare likely to set a suitable level for their statements on corporategovernance in their annual reports. This will be a level that satis-fies investors and explains the companies’ approach to corporategovernance to their stakeholders. All matters of material interest toinvestors should be included in the annual report.

3.4 Other consequences of the Nørby Committee’s report

Since the release of the Nørby Committee’s report, a number ofconferences and seminars on corporate governance have beenheld under various auspices and with many initiators. They includelaw firms, the press, unit trusts, auditing firms, organisations andindustrial associations. Furthermore, several industrial sectorshave also addressed corporate governance. The conferenceshave dealt with the issue from a variety of approaches.

First of all, the Nørby Committee’s recommendations are intendedfor listed companies and companies aiming for a stock exchangelisting. Yet, in its report, the Nørby Committee points out that thereport’s recommendations will – hopefully – inspire other compa-nies, including companies owned by the state and by foundations.

For public corporations, examples show that they have felt in-duced to address the areas of the Nørby Committee’s recommen-dations that seem to be relevant.

Focus on the work on corporate governance in the public sectorhas – inspired by the Nørby Committee’s report – also led to theestablishment of a Forum for Public Senior Management; gener-ally, this forum looks at the role of the senior executive as themanager of a public, politically run organisation (also known aspublic governance).

In connection with its participation in operating corporate enter-prises and undertakings of a form similar to a corporate form, theDanish government contemplated the way in which it handled theownership of and the managerial responsibility for such entities.Against this background, a committee was set up in 2001 withparticipation from the Ministry of Finance, the Ministry of Justice,the Prime Minister’s Office, the Ministry of Transport and the Min-istry of Economic and Business Affairs for the purpose of clarifyingand assessing the problems and, if possible, proposing amend-ments to rules and practice and, in this connection, pointing outany confusion in the rule base.

In September 2003, this committee published a report entitledState-Owned Companies – Supervision, Responsibility and Con-trol. The report gives an extensive description of the problems andcontains a number of the committee’s recommendations. In addi-tion, the report refers to a task force set up with participation fromthe Ministry of Finance, the Ministry of Transport and the Ministryof Economic and Business Affairs to make recommendations forthe exercise of ownership and corporate governance in state-owned companies. The results of this task force’s work are likelyto be made public before long.


The Danish government has taken the initiative in drawing upguidelines for good managerial practice in professional sportsclubs in order to strengthen the conditions prevailing in the sportsindustry for development and professionalisation.

This concept is also becoming popular at the universities in thelight of new university legislation. The Minister for Science, Tech-nology and Innovation has thus set up a committee – GoverningBodies of Universities in Denmark – to make recommendations forthe universities’ new governing bodies.

Since the release of the Nørby Committee’s report, focus on thisissue has also increased in scientific literature and academiccircles in Denmark. The universities and business schools thusboast a number of teachers specialising in corporate governance.They teach corporate governance from a variety of approaches,and the Nørby Committee’s report is part of the syllabus of severalsubjects of study at universities and business schools.

Moreover, the different media publish “charts” of companies pur-suing a strategy of corporate governance. Executives and compa-nies are rated on the basis of a number of selected evaluationcriteria. Finally, corporate governance awards are granted on thebasis of fixed evaluation criteria, of which the Nørby Committee’srecommendations form part.

3.5 Summary

Since its publication, the Nørby Committee’s report has set thedirection for the debate on corporate governance in Denmark. Thisdebate has been broad and has involved company managements,investors, organisations, academics, political circles and othersand has rubbed off on the debate on managerial form.

The report has been the pivotal or a contributory factor in causingindividual companies or individuals in the business community tohave an opinion on corporate governance in general.

The Nørby Committee’s report has also had an impact outsideDenmark. It has come to the knowledge of the Copenhagen StockExchange Committee on Corporate Governance that certaincountries – when drawing up codes of conduct – have found inspi-ration in the Nørby Committee’s report’s form and recommenda-tions.

According to the Committee, the report is generally accepted as aframe of reference for the contents of the concept of corporategovernance in Denmark and for the debate on this issue.


The Nørby Committee’s report took stock of the internationaldevelopment of corporate governance and its trends. This devel-opment has continued unabated since then.

The aim of the following subsections is to give a brief account ofkey international trends in the period following the publication ofthe Nørby Committee’s report.

4.1 US initiatives

The key driving forces behind the development of corporate gov-ernance in both the USA and in Europe in the past couple of yearshave been the reactions to the collapse of Enron, a large USenergy conglomerate, and the subsequent corporate and ac-counting scandals, including the World-Com scandal.

For one thing, these events brought about a demand in the USAfor tighter internal control and reporting in companies, more trans-parency in relation to managerial matters in companies, includingremuneration, a demand for more accounting information andincreased quality, a demand for the establishment of independentaudit committees as well as increased supervision of auditors. Toa large extent, these demands were fuelled by a wish to restoreconfidence in the stock market and its players.The first reaction to these demands was a 10-item action planpresented by the US President, followed by the much publicisedSarbanes-Oxley Act in the summer of 2002. The Sarbanes-OxleyAct is a framework act containing a number of principles andstandards supplemented by detailed rules fixed by the SEC, theUS Securities and Exchange Commission. The act stipulates thataudit committees shall comprise only persons who are independ-ent, and the SEC has adopted specific rules to determine suchindependency.

Other US organisations also took a number of other initiatives.Among them, the New York Stock Exchange and NASDAQ pro-posed or implemented initiatives on corporate governance issues,including independence for members of supervisory boards andsupervisory board committees.

The aforementioned focus on the companies’ problems also re-sulted in initiatives of a more “private” nature such as the Princi-ples of Corporate Governance (May 2002), adopted and publishedby the Business Roundtable, and the reports on corporate govern-ance from the American Law Institute.

4.2 EU initiatives

In 2001, the European Commission set up a task force, The HighLevel Group of Company Law Experts, which, in connection withthe Council meeting in Oviedo in April 2002, was asked to assessthe need for initiatives in the light of the development in the USA inthis area. On 4 November 2002, the task force released a reportentitled A Modern Regulatory Framework for Company Law inEurope containing a number of recommendations to the EuropeanCommission with the aim of strengthening corporate governanceof European companies.

On 21 May 2003, the European Commission published an actionplan to modernise company law and to enhance corporate gov-ernance in Europe; this action plan is widely based on the recom-mendations made by the task force.5

This plan includes specific proposals to improve the legal frame-work for corporate activity for the purpose of establishing competi-tive and efficient companies in the EU. One of the key tools in thisconnection is a strengthening of shareholder democracy and thusthe role of shareholders.

The action plan contemplates using non-binding recommendationsand codes of conduct both at EU and national levels. The Euro-pean Commission does not suggest that action be taken at EUlevel to establish a code of conduct like that adopted by the OECDor like that introduced in nearly all EU member states in recentyears. Instead, it proposes looking at areas where EU regulation isspecifically needed, just as it suggests that the EU play a coordi-nating role in the member states’ development of codes of con-duct.

The European Commission has not chosen the detail-oriented andrule-intensive approach that is taken in the Sarbanes-Oxley Actand which is difficult to use in a European context where prob-lems, markets, traditions and cultures differ in several respectsfrom those seen in the USA.

According to the European Commission’s action plan, the annualreports of listed companies should contain a statement on theircorporate governance structures and practice, including votingrights and ownership details, the composition of the supervisoryboard, etc. The existence of a relevant code of conduct and thecompliance or non-compliance with such code by the individualcompany should also be described (the “comply-or-explain” princi-ple).

5 The Committee has commented on the European Commission’s actionplan. The Committee’s comments are available atwww.corporategovernance.dk.

4 International corporate governance initiatives in Denmark


Action should also be taken to make it easier for the shareholdersof listed companies to exert their influence. One way of ensuringthis would be to remove the legal barriers to using communica-tions technology. A company’s website and the Internet can con-tribute substantially to making communication with shareholderseasier and cheaper and to making the preparation and holding ofgeneral meetings smoother than previously.

In certain areas where the members of a company's managementhave conflicting interests, the action plan contemplates introducingrequirements of independence for persons taking part in decision-making processes. One consequence is that the majority of themembers of supervisory board, audit or remuneration committeesmust remain independent.

The European Commission proposes that institutional investors beordered to account for their investment policy and for their policyon the exercise of voting rights in the companies in which theyinvest. This will allow pension clients and others to check whetherand how the relevant institutional investor exercises its votingrights in a given situation.

The action plan prepared by the European Commission was sub-mitted for consultation in the summer of 2003. A number of spe-cific initiatives are expected to be taken in the coming months.They will not all take the form of traditional EU legislative acts(such as directives and regulations), but will be drawn up as rec-ommendations in some areas.

4.3 National initiatives abroad

A comparison of measures taken at national level shows that thedevelopment of adopting voluntary codes of conduct, alreadyobservable at the release of the Nørby Committee’s report in2001, has continued as the originally adopted codes of conduct inmany countries have been replaced by second-generation (orthird-generation) codes. This applies, for example, to the Germancode of conduct (most recently amended in May 2003) replacingthe former two codes of conduct, the Dutch code of conduct andmost recently the French code of conduct (from October 2003).

Appendix 2 lists existing codes of conduct in different countries,including the date of their latest amendments.

The events in the USA and the initiatives taken at EU level haveaffected the development of corporate governance in the individualmember states. Concepts such as control, risk management,independence and transparency thus play a key role in the ongo-ing debate in most European countries.This is especially so in the United Kingdom, where the BritishCombined Code was amended in July 2003. The amendments

reflect the recommendations in the Audit Committees CombinedCode Guidance report prepared by a task force headed by SirRobert Smith and in the Review of the Role and Effectiveness ofNon-executive Directors report released by Derek Higgs (theHiggs report).

For example, the Higgs report recommends that the role of thechairman of the supervisory board and that of the CEO of a listedcompany be separated; that more independent members be ap-pointed to the supervisory board; that the role of the independentmembers be defined in precise terms; and that a senior independ-ent director be appointed among the independent members of thesupervisory board.

The Combined Code reflects a management structure distinctfrom, say, that seen in Denmark, there being only one manage-ment body (one tier): the supervisory board, whereas Denmarkand certain other European countries have two: a supervisoryboard and an executive board. At the functional level – often in-volving separate meetings with participation from only independentmembers – the British system resembles the Danish system insome respects, however.

The British Combined Code is an important – and probably the key– source of inspiration to the committees or bodies developing andupdating codes of conduct in other countries, both inside andoutside the EU, excluding the USA.

In 2002, the US-based law firm of Weil, Gottschal & Manges drewup the following report for the European Commission: Compara-tive Study of Corporate Governance Codes relevant to the Euro-pean Union and its Member States. This report compares andcomments on corporate governance codes of conduct and pointsout that the individual codes converge substantially.

Until recently, the other Nordic countries had no fixed codes ofconduct, but Sweden now has a corporate governance policydrawn up in 2001 by the Swedish Shareholders Association. InNorway and Finland, the results of drawing up voluntary codes ofconduct have recently been published.

The OECD is revising its 1999 guidelines. According to informationreceived, the revised guidelines will be of a general and overallnature as is the case of the current guidelines.


4.4 Summary

When the Nørby Committee published its report in December2001, focus on risks of irregularities and misuse in companies wasnot as strong as it has been after the release of the report.

The initiatives taken by the USA, by the EU and at national levelall reflect an approach that aims to avoid such problems in future.The key words are control, reliability, risk management, independ-ence and transparency.

The development described above for corporate governance isquite understandable – and may also be needed.

However, the question yet to be answered is whether all the reac-tions to the problems that have emerged are relevant or whethersome of them have resulted in an approach that focuses too muchon risk, misuse and control. Imposing further obligations on com-panies entails more costs and involves the use of more resources,which must be seen against the background that the large majorityof companies function and act as they are legitimately expected todo.


In the light of the development having taken place internationallyand in Denmark in the area of corporate governance, the Com-mittee has assessed the need for a revision of the Nørby Com-mittee’s recommendations.

The Committee’s assessment highlights key areas where changesto the existing recommendations may be considered. The follow-ing paragraphs point out a number of areas where the Committeebelieves there may be a need for revision or elaboration of theexisting recommendations. The paragraphs also describe a num-ber of areas where the Committee has discussed the need forchanges, but where it has not yet made any proposals. In section7, the Committee presents its proposal for revised recommenda-tions.

Two important factors underlying the Committee’s assessmentmust be singled out: The Nørby Committee’s recommendationsare fundamentally appropriate, and their effect is as intended.

These conditions imply that the need for a revision of the recom-mendations is a question of revising or elaborating the existingrecommendations rather than changing them fundamentally.

Degree of specificationThe specific nature of the existing recommendations was chosenby the Nørby Committee with the aim of setting a framework forthe debate on corporate governance that companies and theirmanagements could address specifically.

In the light of the international development of corporate govern-ance and its general acceptance in Denmark, it is arguablewhether the same degree of specification would be needed,should a brand new set of recommendations be drawn up rightnow. Conversely, the fact that the specific nature of the recom-mendations has made them operational and been a tool for anactive approach cannot be disregarded.

According to the Committee, some of the recommendations forcorporate governance could preferably be revised to shift focusfrom giving companies specific instructions to ensuring that theindividual company uses the relevant principles and basic ideasfor the purpose of finding the solutions best suited for that com-pany’s situation and needs.

The degree of specification in respect of the recommendationsmust be seen against the background that a comply-or-explainprinciple could be the outcome of EU initiatives. In the light of thedevelopment having taken place since and by virtue of the NørbyCommittee’s recommendations, the Committee suggests a morebalanced approach to some of the specific limits set out in therecommendations for age, term of office and number of supervi-sory board meetings.

Target groupThe Committee has discussed the need to differentiate the rec-ommendations according to the size of the individual companies.Generally, the Committee does not believe that it is necessary todistinguish between recommendations targeted at small compa-nies and recommendations targeted at large companies.

Listed companies whose shares are offered to the public andwhich, as a result, have a relatively broad ownership base shouldgenerally be subject to the same high requirements for corporategovernance, irrespective of their size.However, this does not rule out the possibility that the size of acompany, its degree of international commitment, etc., could implya different approach to a specific recommendation.

Interaction between the supervisory board and the executiveboardIn countries such as the USA and the United Kingdom, the corpo-rate governance debate focuses on the supervisory board’s roleas a body supervising the activities of the executive board (day-to-day management). Most of the debate centres on how to introducemeasures to ensure that the entire supervisory board remainssufficiently independent of the executive board to maintain itssupervisory role, while continuing to have an informed insight intothe company’s affairs.

In relation to the Danish two-tier management structure, wheredifferent persons, as the principal rule, sit on the supervisory andexecutive boards, considerations in respect of the balance be-tween independence, control and insight are also important, al-though Danish company law already addresses some of theproblems that attract attention in certain other countries.

Basically, Danish company law sets a framework for the tasks andresponsibilities to be assigned to the supervisory board, includingthe chairman, and to the executive board, respectively. It stipu-lates that the majority of the members of the supervisory boardmay not be executive officers of the relevant company and that thechairman of the supervisory board and the CEO may not be oneand the same person. This is very common in the USA, just asduality of roles is generally the rule rather than the exception.

In Denmark, the supervisory board must perform the role as abody supervising the activities of the executive board, while draw-ing up or addressing strategies and acting as a sounding board forthe executive board.

The balance to be achieved in the supervisory board’s composi-tion and work requires taking a position on the degree of inde-pendence needed for the supervisory board to exercise its super-vision effectively as well as taking a position on how to best en-sure that the supervisory board has the necessary insight into the

5 The need for revision of the Nørby Committee’s recommendations


company’s affairs for it to perform its supervision and act as astrategic and tactical partner for the executive board – naturally incompliance with existing legislation.

The supervisory board’s role of supervising the activities of theexecutive board is important, but no attempts to strengthen thisrole must be made at the expense of the supervisory board’svalue-creating role and strategy work. Efforts must be made toallow the supervisory board to perform its role as a supervisingand value-creating corporate body in an expedient manner. Theindividual supervisory board must ensure that control proceduresand value-creating processes are properly balanced. This processmust not only take place in compliance with rules and procedures,but should also take place specifically in the interaction betweenthe management bodies.

Supervisory board committeesThe Danish management structure and its inherent traditionsmean that the supervisory boards of Danish companies are gen-erally smaller than seen in the USA and the United Kingdom, forexample.

The sometimes quite big supervisory boards seen abroad, com-bined with increased focus on the supervisory role, have made theuse of supervisory board committees more widespread and evenmandatory in certain countries and on certain stock exchanges inrespect of certain of these committees.

Supervisory board committees have different roles and names, butthe prevailing ones are currently audit committees, nominationcommittees and remuneration committees.

In Denmark, opinions differ over the expediency of using supervi-sory board committees. On the basis of the typical size of thesupervisory board of a Danish listed company, the Nørby Com-mittee generally recommended that no supervisory board com-mittees be used.

However, international trends and increased focus on controlmean that it cannot be ruled out that Danish companies with par-ticularly complex accounting and auditing needs could profit byusing an audit committee.

It is essential to keep in mind that the use of supervisory boardcommittees does not change the fact that the supervisory board ofan individual company makes its decisions and performs its trans-actions as a corporate body and that the supervisory board mustconsequently consider whether using such committees can pro-vide quality to the decision-making process.

A supervisory board committee may perform a preparatory roleonly. The responsibility for the decisions and work of the supervi-

sory board must remain with the entire board. This must be re-flected in the company’s business procedures.

Risk managementIn a corporate context, a risk is defined as any event the occur-rence of which may prevent a company from realising its goals orfrom achieving all of its goals. Given the insight into and experi-ence of corporate governance currently available, the question ofrisk management becomes a key element in corporate govern-ance.

In the United Kingdom for example, the issue of risk managementhas been thoroughly addressed in connection with corporategovernance. This means that British companies have receivedsubstantial advice on what action to take in relation to risk man-agement. Some of the tools developed for risk management arethe so-called compliance programmes.

The Nørby Committee states in its recommendations that theremay be a need to specify the section on risk management. TheCommittee has drawn up a draft in this respect.

AuditingThe international debate on and the development of corporategovernance have focused considerably on the auditors’ role andtasks.

The supervisory board should focus on the relationship betweenthe supervisory board and the auditors. The responsibility forrecommending auditors for appointment by election rests with thesupervisory board and not the executive board.

The basis of agreement with the auditors and thus the frameworkfor the auditors’ work should be determined by the supervisoryboard.

The supervisory board may choose to keep focus on the auditingprocess and ensure a meticulous review of auditing and account-ing conditions by setting up an audit committee.

The Nørby Committee’s report contains no recommendations forthe relationship between a company and its auditors. The Com-mittee is of the opinion that international trends – to name onefactor – make it necessary to specify individual items in relation tothe election of and cooperation with the auditors.

The independence of the supervisory boardThe question of the independence of the members of the supervi-sory board is pivotal in relation to a number of corporate govern-ance areas. The Committee is aware that the question of inde-pendence may depend on the individual situation and that not all is


covered by the definition of independence provided in the existingrecommendations.

The individual company must take relevant action in each specificcase to enable the company in general meeting to appoint a su-pervisory board that is mainly made up of persons meeting thedefinition of independence.

Staff-elected members of the supervisory boardStaff-elected members of the supervisory board who by virtue oftheir employment with the company are not independent mayjeopardise the independence of the supervisory board if the situa-tion is not explained to foreign investors in particular.The Nørby Committee’s recommendations do not describe the roleof staff-elected members of the supervisory board. Information onthe duties and responsibilities of staff-elected members of thesupervisory board could preferably be included in the recommen-dations.

Voting rights differentiation in the number of shares (via class Aand class B shares, for example)Generally, the principles of freedom of contract apply to the ar-rangement of an individual company’s capital structure. Thismeans that market players are free to assess and decide whetherthey want to invest in the relevant company.

Transparency is a key factor to enable market players to make thisdecision. It is therefore important that the company’s managementexplains and describes the company’s capital structure and theconsiderations taken in that respects.Information on the remuneration of executivesTransparency in respect of the remuneration of individual execu-tives is discussed internationally. In this connection, some pointout that full transparency is needed as non-transparency maydiscredit the individual company. However, others say that know-ing the principles underlying such remuneration – and not theactual amount paid to an individual executive – is essential.

The Committee believes that the outside world has a particularinterest in knowing about special agreements to remunerate themanagement of a company, including agreements for severancepay, pensions, etc.

The disclosure requirements of the Copenhagen Stock Exchangestipulate that listed companies must inform the Copenhagen StockExchange of any special agreements for the supervisory andexecutive boards, including special agreements for severance pay,as well as any extraordinary incentive schemes and the like of-fered to a company’s supervisory and executive boards. Finally,individual details must be provided for any extraordinary fees paidto the members of the supervisory board in addition to ordinaryfees.

International practice tends towards publication of individual remu-neration information, including details of the composition of eachperson’s “remuneration package”.

Long-term focus and quarterly reportsThe Nørby Committee’s report recommends that companies pub-lish quarterly reports. Discussions have taken place on the riskthat presenting quarterly reports may reduce corporate focus to ashort-term outlook.

According to the Committee, periodical information (includingquarterly information) from the companies to the markets is es-sential to ensure a well-functioning stock market and confidence incompanies. But the Committee also points out that it is importantthat the individual supervisory board takes every step to preventquarterly accounting details from leading to any short-term deci-sions by the executive and supervisory boards and to ensure thatadequate resources are allocated to the supervisory board to allowit to address long-term issues.

The relationship with the company’s owners – general meetingsFollowing the publication of the Nørby Committee’s report, Danishcompany law has been amended in some respects. The new rulesallow general meetings to take place electronically and also en-able electronic communication between a company and its share-holders and between individual shareholders (electronic notices toconvene general meetings and electronic proxies, for example).Electronic communication may take place when the company ingeneral meeting has passed a resolution in this respect or whenthe company and its shareholders conclude a bilateral agreementto do so.


This report forms the basis for a consultation process. On thebasis of the comments to be received, the Committee intends todraw up a consultation paper outlining the general positions statedby the individual parties.

Furthermore, the Committee will make a thorough assessment ofthe comments received and also assess the consequences inrelation to the Committee’s specific proposals for revised recom-mendations.

The Committee believes – and has based its work on this idea –that corporate governance guidelines must remain non-bindingrecommendations.

The Committee also believes that the Copenhagen Stock Ex-change is the right forum in which to embed such recommenda-tions – however, on the condition that a body continues to monitorthe development of corporate governance and is in a position toreact promptly if revisions of the recommendations are deemedrelevant or needed. This is consistent with the position and possi-bility expressed by the European Commission in its action planand supported by the Committee in its comments to the actionplan.

The Committee finds that having a committee that monitors thedevelopment of corporate governance and which ensures thatrecommendations have the intended dynamic effect in practicehelps support the work and focus on corporate governance inDenmark.

6 Considerations for future work in the light of the past development in this area


The recommendations include the following eight main areas:

I. The role of the shareholders and their interaction with themanagement of the company

II. The role of the stakeholders and their importance to thecompany

III. Openness and transparencyIV. The tasks and responsibilities of the supervisory boardV. The composition of the supervisory boardVI. Remuneration to the members of the supervisory board and

the executive boardVII. Risk managementVIII. Audit

1. Exercise of ownership and communicationThe shareholders can be motivated to exercise their rights and touse their influence if the supervisory board makes it as easy andcostless as possible for the shareholders. It is recommended thatthe companies look into in which areas information technology canbe used to improve the communication between the company andthe shareholders, and between the individual shareholders in thecompany

2. Restrictions on voting rights etc.It is not recommended to include provisions which contain votingrights differentiation restrict the number of votes which the individ-ual shareholder can cast, or which restrict the number of shareswhich the individual shareholder may own in the company.

If these restrictions are already part of a company’s articles ofassociation, it is recommended that the supervisory board evalu-

ates the expediency of this and accounts for its evaluation ofwhether a revocation of these restrictions is desirable and possiblein the annual report.

3. Preparation for the general meeting including notice ofmeeting and proxyIt is recommended that the general meeting is called with sufficientnotice so that the shareholders are able to prepare for the meetingand decide on the issues which will be dealt with at the generalmeeting. The notice of meeting, including the agenda, should bedrawn up in such a way that the shareholders are provided with asatisfactory picture of the matters included in the points of theagenda. Proxies given to a company’s supervisory board shall belimited to one particular general meeting and should, as far aspossible, include the position of the shareholder regarding eachpoint on the agenda.

4. Duties of the board and rights of the shareholders in theevent of takeover bidsIn the event of attempted takeovers, it is recommended that theshareholders are given the opportunity to decide if they wish tosurrender their shares in the company on the conditions offered.Therefore, without the acceptance of the general meeting, or on itsown, the supervisory board should refrain from countering a take-over bid by reaching decisions which in reality prevent the share-holders from deciding on the takeover bid. The decisions whichare advised against include implementing capital increases orallowing the company to buy its own shares based on a previouslyannounced authority for instance.

1. The company’s policies in relation to the stakeholdersIt is recommended that the supervisory board adopts a policyregarding the company’s relationship with its stakeholders which,for instance, could include the company’s business concept and itsbasic values and objectives. One element of such a policy couldbe the guidelines for the company’s information about environ-mental and social issues, for example.

7 Proposal for revised recommendations

I. The role of the shareholders and their interaction with themanagement of the companyThe shareholders, the owners of the companies and society have ajoint interest in the companies always being capable of adjusting tochanging demands, which allows the companies to continue to becompetitive and continue to create value. Corporate governanceimplies that the supervisory board and the executive board under-stand that interaction between the management and the shareholdersis of vital importance to the company. As owners of the company, theshareholders can actively exercise their rights and use their influenceresulting in the management protecting the interests of the sharehold-ers as best as possible, and ensuring efficient deployment of thecompany’s funds both in the short as well as the long term.

Therefore, good corporate governance depends on appropriateframeworks which encourage the shareholders to enter into a dia-logue with the management of the company and each other. This canbe encouraged through a strengthening of the general meeting’s roleas a forum for communication and decisions, and by creating propor-tionality between capital investments and the voting rights of all theshares in the company.

II. The role of the stakeholders and their importance to the com-panyIt is decisive for a company’s prosperity and future possibilities thatthe company has a good relationship with its stakeholders.Stakeholders are everyone who are directly affected by the com-pany’s decisions and business. Thus, it is desirable that the com-pany’s management runs and develops the company with due con-sideration of its stakeholders, and that the management provides anincentive for a dialogue with these.

A successful interaction between the company and its stakeholdersimplies openness and mutual respect.


2. The role of the stakeholders and their interestsIt is recommended that the supervisory board ensures that theinterests and roles of the stakeholders are respected in accor-dance with the company’s policy regarding this. As part of per-forming this, it is natural that the supervisory board ensures thatthere is an ongoing dialogue between the management and thecompany’s stakeholders, in order to develop and strengthen thecompany.

1. Information and publication of informationIt is recommended that the supervisory board adopts an informa-tion and communication policy. Furthermore, it is recommendedthat the company develops procedures which ensure that thecompany immediately publishes all essential information of im-portance for how the shareholders and the financial marketsevaluate the company and its activities, as well as its businessgoals, strategies and results, unless publication can be omittedaccording to the legal rules of the stock exchange. The publicationmust be carried out in a reliable and adequate manner.

It is recommended that published information is both in Danishand in English, and if necessary, any other relevant languages andthat it includes the use of the company’s website. The companyshould have identical websites in Danish and English and anyother languages if relevant.

2. Investor relationsIt is recommended that the supervisory board ensures that thecontinuous dialogue between the company and the company’sshareholders and potential shareholders is made flexible. This canbe done in the following ways:

• by holding investor meetings.• by continuously evaluating if information technology can be

used to improve investor relations, including using part of thecompany’s website to deal with corporate governance relatedissues.

• by making all investor presentations accessible on the Inter-net at the same time as they are made.

3. Annual reportThe annual report must be presented according to the relevantDanish laws. Listed companies shall on a consolidated basis applythe international accounting standards IAS/IFRS as from 2005.Other accepted standards such as US-GAAP can be applied assupplements, if this is relevant in connection with trade conditionsor other circumstances with regard to the information requirementsof the recipients, including comparability facilitation.

4. Additional informationIn connection with the preparation of the annual report it is rec-ommended that the supervisory board decides if it is expedientthat the company publishes further elaborating non-financial in-formation, even in instances where this is not required by theDanish Financial Statements Act or any other laws. Such informa-tion could be information about the company’s

• development and maintenance of internal knowledge re-sources.

• ethical and social responsibilities.• health and safety policies.

5. Quarterly reportsIt is recommended that companies use quarterly reports.

1. The overall tasks and responsibilities of the supervisoryboardThe supervisory board must handle the overall strategic manage-ment and the financial and the managerial supervision of thecompany and continuously evaluate the executive board’s work.The supervisory board’s most essential tasks include:

• establishing the overall goals and strategies and following upon these.

• ensuring clear guidelines for responsibility, distribution ofresponsibilities, planning and follow-up, as well as risk man-agement.

III. Openness and transparencyTo various extents it is necessary to provide shareholders, includingpotential shareholders and other stakeholders, with information aboutthe company. How they understand and relate to the company de-pends on the amount of information and the quality of the informationpublished or provided by the company. Openness and transparencyare essential conditions for ensuring that the company’s shareholdersand other stakeholders are able to continuously evaluate and relate tothe company and its prospects, and through this, openness andtransparency can contribute to a constructive interaction with thecompany.

IV. The tasks and responsibilities of the supervisory boardThe supervisory board is responsible for carefully safeguarding theshareholders’ interests, with due consideration of the otherstakeholders. As concerns the managerial division of tasks betweenthe supervisory board and the executive board, the supervisory boardis assigned with, and responsible for, handling the overall manage-ment of the company, as well as supervising and establishing theguidelines for the executive board’s work. One important managementtask is to develop and establish appropriate strategies for the com-pany. It is important that the supervisory board ensures that there iscontinuous development and follow-up on the necessary strategies incollaboration with the executive board.


• appointing a qualified executive board, establish the manag-ers’ conditions of employment, including preparing guidelinesfor the appointment and composition of the executive board,as well as ensuring that the remuneration of the executivesreflects the results they achieve.

• ensuring that relations to the company’s stakeholders aregood and constructive.

2. The chairman’s tasksThe chairman is especially responsible for ensuring that the su-pervisory board functions satisfactorily and that the tasks of thesupervisory board are handled in the best possible way. In thisconnection, it is recommended that the chairman ensures that theindividual member of the supervisory board’s particular knowledgeand competence are used as best as possible in the supervisoryboard work for the benefit of the company. The supervisoryboard’s frequency of meeting is planned in such a way that thesupervisory board acts as an active sparring partner to the execu-tive board and is able to react quickly and efficiently at all times.

It is recommended that the company appoints a deputy chairman.The deputy chairman must be able to act in the chairman’s ab-sence and in addition be an efficient sparring partner to the chair-man. The chairman should try to ensure that the board’s negotia-tions take place when all the members of the supervisory boardare present and that all essential decisions are made when all themembers of the supervisory board are present.

It is recommended that the company prepares a work and taskdescription containing a description of the tasks, duties and re-sponsibilities of the chairman, and the deputy chairman, if re-quired.

3. ProceduresIt is essential that the procedures of the supervisory board are anefficient and functional tool for solving the supervisory board’stasks. It is recommended that the procedures are always adjustedto the requirements of the individual company, and that all themembers of the supervisory board review the procedures withregard to ensuring this at least once a year.

4. Information from the executive board to the supervisoryboardIt is recommended that the supervisory board establish proce-dures for how the executive board reports to the supervisory boardand for any other communication between the supervisory boardand the executive board. This will ensure that the supervisoryboard is provided with the information about the company’s busi-ness which the supervisory board requires on a continuous basis.In all circumstances the executive board must ensure that thesupervisory board is provided with essential information, whetherthe supervisory board has requested it or not.

1. Recruitment and election of members of the supervisoryboardIt is recommended that the supervisory board ensures that thecandidates for the supervisory board, who are nominated by thesupervisory board, have the relevant and necessary knowledgeand professional experience in relation to the requirements of thecompany, including the necessary international background andexperience if this is relevant. The supervisory board should ensurea formal, thorough and transparent nomination process. Moreover,the supervisory board should ensure that a given board composi-tion as a whole will provide the supervisory board with the skillsthat are necessary for the supervisory board to be able to performits tasks in the best possible way.

It is recommended that the supervisory board encloses a descrip-tion of the nominated candidates’ background in the notice of thegeneral meeting when the election of the members of the supervi-sory board is on the agenda. At the same time, the supervisoryboard should state the recruitment criteria which the supervisoryboard has established, including the requirements of professionalqualifications, international experience etc. which, in the opinion ofthe supervisory board, represent essential qualities with regard tothe supervisory board. The owners of the company should begiven an opportunity to discuss these criteria. Also, other execu-tive functions of the candidates in other Danish or foreign compa-nies and organisations should be disclosed.

2. Training and introduction for members of the supervisoryboardWhen new members of the supervisory board join the supervisoryboard it is recommended that they are given an introduction to thecompany and that the chairman, in collaboration with the individualsupervisory board member, decides if it is necessary to offer themember in question any relevant, supplementary training. Thetraining, which can also be offered continuously, should be ad-justed to the individual supervisory board member’s needs andshould ensure that each of the members of the supervisory boardare capable of:

V. Composition of the supervisory boardIt is essential that the supervisory board is composed in a such amanner that it is capable of handling its managerial tasks, includingthe strategic tasks of the company in a efficient and forward lookingmanner, and that it acts as a constructive and qualified sparringpartner for the executive board at the same time. It is also essentialthat the members of the supervisory board always act independentlyof special interests. The supervisory board must continuously ensurethat its composition and its procedures reflect the demands posed bythe company’s current situation and circumstances.


• taking part in a qualified dialogue with the executive boardabout the company’s strategic development and prospects.

• acquiring and keeping an overview of the company’s coreareas, activities and the conditions of the industry in question.

• actively participating in the supervisory board work.

In addition, the members of the supervisory board are solely re-sponsible for actively obtaining knowledge and continuouslykeeping themselves posted about the conditions of the companyand the industry in question.

3. The number of supervisory board membersIt is important that the supervisory board has a size which allowsfor a constructive debate and an efficient decision process, inwhich it is possible for all the members of the supervisory board toplay an active part. Against this background it is recommendedthat the supervisory board consists of no more than six memberselected by the general meeting. The supervisory board must con-sider if the number of supervisory board members is appropriate inrelation to the requirements of the company on an on-going basis.

4. The supervisory board’s independenceIt is important that the supervisory board is composed in such away that its members can act independently of special interests.Therefore, it is recommended that the majority of the members ofthe supervisory board elected by the general meeting are inde-pendent. In this context an independent supervisory board mem-ber elected by the general meeting cannot:

• be an employee in the company or be someone who hasbeen employed in the company in the past five years.

• have been a member of the executive board of the company.• be a professional consultant to the company or be employed

by, or have a financial interest in, a company which is a pro-fessional consultant to the company.

• have some other essential strategic interest in the companyother than that of a shareholder.

We cannot recommend that members of the executive board of acompany are also members of the supervisory board of the com-pany. This also applies to situation in which major shareholdersare executives of a company as well as supervisory board mem-bers at the same time. In companies with one major shareholder,the supervisory board should pay special attention to the safe-guarding of the other shareholders’ interests on equal terms withthe major shareholder’s interests at all times.

It is recommended that the annual report contains the followinginformation about the supervisory board members elected by thegeneral meeting:

• the supervisory board member’s occupation.

• the supervisory board member’s other managerial positionsor directorships in Danish as well as foreign companies andorganisations.

• how many shares, options and warrants the supervisoryboard member owns in the company and in affiliated compa-nies and the changes in the supervisory board member’sportfolio of the mentioned securities which have taken placeduring the accounting year.

5. Staff-elected members of the supervisory boardSupervisory board members elected by the staff have the samerights, obligations and duties as the supervisory board memberselected by the general meeting. By virtue of their employment bythe company they are not independent. It is recommended thateach company considers the need to explain the system regardingstaff-elected members of the supervisory board in the annualreport, on the company’s website or otherwise, which will particu-larly be relevant to ensure foreign investors’ understanding of theimportance and function of such system.

6. Meeting frequencyIt is recommended that the supervisory board meets regularlyaccording to a pre-prepared meeting and work schedule and whena meeting seems necessary or appropriate in the light of the com-pany’s requirements. The annual meeting frequency should bepublished in the annual report.

7. Time allocated to supervisory board work and the numberof supervisory board seatsIt is important that the individual member of the supervisory boardunderstands what time requirements the supervisory board workplaces on him in advance and that he allocates sufficient time forhis tasks on the supervisory board. It is recommended that asupervisory board member who is also a member of the executiveteam of an active company does not hold more than three ordinarysupervisory board seats or one chairmanship and one ordinarysupervisory board seat in companies which are not part of thegroup, except in exceptional circumstances.

8. Retirement ageThe annual report should contain information about the age of theindividual members of the supervisory board. It is recommendedthat the company fixes a retirement age for members of the super-visory board.

9. Election periodIt is recommended that members of the supervisory board are upfor (re)election each year at the general meeting.Continuity should be maintained through the replacement of thesupervisory board. The annual report should state when the mem-ber of the supervisory board joined the board, if the member of thesupervisory board has been reelected and when the new election


period expires. It is recommended that the company fixes a periodafter which the chairman and the other members of the supervi-sory board no longer can be elected or reelected.

If a supervisory board member’s conditions of employment changeduring an election period he should inform the other members ofthe supervisory board of this and be prepared to make his man-date available at the next general meeting.

10. Use of board committeesWhether a board committee should be established depends on thespecific conditions of each company, including the size and modusoperandi of the supervisory board and the size and complexity ofthe company. If the supervisory board appoints a committee, thisshould only be done in connection with matters regarding limitedsubjects in order to prepare decisions that must be reached by allof the members of the supervisory board. It is important that thesupervisory board ensures that the appointment of a board com-mittee does not result in important information directed at allmembers of the supervisory board only reaching the board com-mittee. The supervisory board must disclose whether it has cho-sen to use board committees in the annual report and, if so, thereason why. Moreover, the company may benefit from disclosingessential items of the rules of procedure of the board committeeas well as the names of the members.

11. Self-assessment of the supervisory board’s workWe recommend that the supervisory board establishes an as-sessment process which continuously and systematically evalu-ates the work, results and composition of the supervisory boardand the individual board members, including the chairman, inorder to improve the supervisory board’s work. In this connection,the criteria of the evaluation should be clearly specified. Whenassessing the supervisory board as a whole, there is a clear needto evaluate to what extent previously established strategic goalsand plans have been realised. It will be appropriate to carry out theassessment once a year and the chairman will be responsible forthis, and if necessary, with external help. The result will be dis-cussed by the entire supervisory board. Furthermore, it is recom-mended that the supervisory board states the procedures of thesupervisory board’s self-assessment in the annual report.

12. Assessment of the executive board’s workIt is recommended that the supervisory board evaluates the ex-ecutive board’s work and results according to already establishedexplicit criteria once a year.

13. Assessment of the collaboration between the supervisoryboard and the executive boardIt is recommended that the executive board and the supervisoryboard establish a procedure by which the collaboration betweenthe supervisory board and the executive board is assessed in an

annual meeting between the CEO and the chairman of the super-visory board. The result of the assessment should be presented tothe entire supervisory board.

1. RemunerationIt is recommended that the total remuneration (basic pay, bonus,price-related incentive schemes, pension, severance pay andother benefits) is at a competitive and fair level and reflects theexecutives’ and supervisory board members’ independentachievements and value creation in the company.

2. Openness about remunerationIt is recommended that the annual report contains information onthe principles and size of the total remuneration to the members ofthe supervisory board and the executive board.

3. Principles of establishing incentive schemesThe supervisory board establishes the principles and the guide-lines for the preparation of any incentive schemes for the com-pany’s executives and supervisory board members, and concern-ing the latter, with regard to their acceptance at the general meet-ing. It is recommended that the total remuneration is competitiveand reasonable and that it reflects how the executives and super-visory board members have performed independently, as well ashow much value they have created for the company. Likewise,incentive schemes should reflect the interests of the shareholdersand the company, be adjusted to the company’s specific circum-stances and be reasonable in relation to the tasks and the respon-sibilities of the executives and supervisory board members.

The remuneration for the members of the supervisory board mayconsist of incentive schemes, including bonus schemes andshares at market price, but we cannot recommend that it consistsof share option schemes.

If the remuneration for the executives consists of share or sub-scription options, we recommend that the schemes are set up as

VI. Remuneration to the members of the supervisory board andthe executive boardA competitive remuneration is a prerequisite for attracting and keepingcompetent supervisory board members and executives. The remu-neration to the supervisory board members and the executives shouldbe reasonable in connection with the assigned tasks and the respon-sibilities which are connected with solving these tasks.

Performance-related pay may result in conflicting interests betweenthe shareholders and the executives, and may lead to the executivesfocusing on increasing the value creation of the company.

It is important that there is openness about all important issues re-garding the principles and size of the total remuneration to the mem-bers of the supervisory board and the executive board.


roll-over schemes (i.e. the options are allocated and expire over anumber of years) and that the redemption price is higher than themarket price at the time of the allocation. Moreover, the schemesshould be set up in a way that promotes long-term behaviour andthey should be transparent, as well as clearly understandable tooutsiders. Valuation should be made according to generally ac-cepted methods.

4. Openness and transparency regarding performance-relatedpay based on sharesWe recommend that all important issues regarding performance-related pay based on shares are published in the company’sannual report, including who receives it and what the total for theexecutives and the supervisory board members amounts to. Like-wise, information about the incentive remuneration based onshares to the individual member of the supervisory board or ex-ecutive should also be published in the company’s annual report.

5. Severance schemes for the managersIt is recommended that the most important contents of the sever-ance schemes shall be disclosed in the company’s annual report.

1. Identification of risksWhen formulating the company’s strategy and overall goals, it isrecommended that the supervisory board and executive boardidentify the greatest business risks involved in the realisationhereof.

2. Plan for risk managementIt is recommended that the executive board on the basis of theidentified risks prepares a plan for the company’s risk manage-ment and submits it for supervisory board approval. The executive

board should currently report to the supervisory board so that thesupervisory board can systematically follow the development insignificant risk areas. The report may, among other things, containprocedures and action plans that can eliminate, reduce, divide oraccept these risks.

3. OpennessIt is recommended that the company’s annual report containsinformation about the company’s risk management activities.

1. The supervisory board’s nomination of auditor-candidateThe supervisory board should in consultation with the executiveboard make a specific and critical assessment of the auditor’sindependence and competence, etc to be used in connection withthe presentation of the nomination at the general meeting.

2. The agreement with the auditorThe auditor agreement and the auditor’s fee should be agreedbetween the company’s supervisory board and the auditor.

3. Non-auditor servicesThe supervisory board should adopt an overall, general frameworkfor the auditor’s provision of non-auditor services with a view toensuring the auditor’s independence, etc.

4. Internal control systemsThe supervisory board should at least once a year review andassess the internal control systems within the company as well asthe management’s guidelines for and monitoring of such systems.

5. Accounting policies and accounting estimatesWhen the supervisory board reviews the annual report (or a draftof the annual report) together with the auditor the accountingpolicies and accounting estimates should be discussed. The ex-pediency of the chosen accounting policies should be considered.

6. Result of the auditThe result of the audit should be discussed at meetings with thesupervisory board in order to review the auditor’s observations andopinion, possibly based on a draft of the long-form audit report.

7. Audit committeeIn companies with complex accounting and audit conditions thesupervisory board should consider whether to establish an auditcommittee to assist the board in matters involving accounting andaudit questions.

VII. Risk managementEfficient risk management is a prerequisite for the supervisory boardbeing able to perform the tasks for which it is responsible in the bestpossible way. Thus it is important that the supervisory board ensuresthat there are appropriate systems for risk management in place and,moreover, ensures that such systems meet the requirements of thecompany at any time.

he purpose of risk management is:

• to develop and maintain an understanding within the organisa-tion of the company’s strategic and operational goals, includingidentification of the critical success factors for achieving goals.

• to analyse the possibilities and challenges which are connectedwith the realisation of the above goals and to analyse the risk ofthese goals not being met.

• to analyse the most important activities of the company in orderto identify the risks attached hereto.

• to determine the venture spirit of the company.

VIII. AuditEnsuring a competent and independent audit is an essential elementof the supervisory board’s work. It is recommended that the contrac-tual basis and thus the framework of the auditor’s work is determinedby the supervisory board.


Committee’s proposal for revised recommendations Nørby Committee’s recommendations of December 2001

(Please note that we have changed terminology since the Nørby report - e.g. fromboard of directors to supervisory board, etc.)

The recommendations include the following eight main areas:

I. The role of the shareholders and their interaction with the management of thecompanyII. The role of the stakeholders and their importance to the companyIII. Openness and transparencyIV. The tasks and responsibilities of the supervisory boardV. The composition of the supervisory boardVI. Remuneration to the members of the supervisory board and the executive boardVII. Risk managementVIII. Audit

I. The role of the shareholders and their interaction with the management of thecompanyThe shareholders, the owners of the companies and society have a joint interest inthe companies always being capable of adjusting to changing demands, whichallows the companies to continue to be competitive and continue to create value.Corporate governance implies that the supervisory board and the executive boardunderstand that interaction between the management and the shareholders is of vitalimportance to the company. As owners of the company, the shareholders can ac-tively exercise their rights and use their influence resulting in the managementprotecting the interests of the shareholders as best as possible, and ensuring effi-cient deployment of the company’s funds both in the short as well as the long term.

Therefore, good corporate governance depends on appropriate frameworks whichencourage the shareholders to enter into a dialogue with the management of thecompany and each other. This can be encouraged through a strengthening of thegeneral meeting’s role as a forum for communication and decisions, and by creatingproportionality between capital investments and the voting rights of all the shares inthe company.

1. Exercise of ownership and communicationThe shareholders can be motivated to exercise their rights and to use their influenceif the supervisory board makes it as easy and costless as possible for the sharehold-ers. It is recommended that the companies look into in which areas informationtechnology can be used to improve the communication between the company andthe shareholders, and between the individual shareholders in the company

2. Restrictions on voting rights etc.It is not recommended to include provisions which contain voting rights differentiationrestrict the number of votes which the individual shareholder can cast, or whichrestrict the number of shares which the individual shareholder may own in the com-pany.

If these restrictions are already part of a company’s articles of association, it isrecommended that the supervisory board evaluates the expediency of this andaccounts for its evaluation of whether a revocation of these restrictions is desirableand possible in the annual report.

3. Preparation for the general meeting including notice of meeting and proxyIt is recommended that the general meeting is called with sufficient notice so that theshareholders are able to prepare for the meeting and decide on the issues which willbe dealt with at the general meeting. The notice of meeting, including the agenda,should be drawn up in such a way that the shareholders are provided with a satis-factory picture of the matters included in the points of the agenda. Proxies given to acompany’s supervisory board shall be limited to one particular general meeting andshould, as far as possible, include the position of the shareholder regarding eachpoint on the agenda.

The recommendations include the following seven main areas:

I. The role of the shareholders and their interaction with the management of thecompanyII. The role of the stakeholders and their importance to the companyIII. Openness and transparencyIV. The tasks and responsibilities of the boardV. The composition of the boardVI. Remuneration to the directors and the managersVII. Risk management

I. The role of the shareholders and their interaction with the management of thecompanyThe shareholders, the owners of the companies and society have a joint interest in thecompanies always being capable of adjusting to changing demands, which allows thecompanies to continue to be competitive and continue to create value. Good corporategovernance implies that the board and the management understand that interactionbetween the management and the shareholders is of vital importance to the company.As owners of the company, the shareholders can actively exercise their rights and usetheir influence resulting in the management protecting the interests of the sharehold-ers as best as possible, and ensuring efficient deployment of the company’s fundsboth in the short as well as the long term.Therefore, good corporate governance depends on appropriate frameworks whichencourage the shareholders to enter into a dialogue with the management of thecompany and each other. This can be encouraged through a strengthening of theAGM’s role as a forum for communication and decisions, and by creating proportional-ity between capital investments and the voting rights of all the shares in the company.

1. Exercise of ownership and communicationThe shareholders can be motivated to exercise their rights and to use their influence ifthe board makes it as easy and costless as possible for the shareholders. It is recom-mended that the companies look into in which areas information technology can beused to improve the communication between the company and the shareholders, andbetween the individual shareholders in the company

2. Restrictions on voting rights etc.It is not recommended to include provisions which contain voting rights differentiationrestrict the number of votes which the individual shareholder can cast, or which restrictthe number of shares which the individual shareholder may own in the company.

If these restrictions are already part of a company’s Articles, it is recommended thatthe board evaluates the expediency of this and accounts for its evaluation of whethera revocation of these restrictions is desirable and possible in the annual report.

3. Preparation for the AGM including notice of meeting and authorisationIt is recommended that the AGM is called with sufficient notice so that the sharehold-ers are able to prepare for the meeting and decide on the issues which will be dealtwith at the AGM. The notice of meeting, including the agenda, should be drawn up insuch a way that the shareholders are provided with a satisfactory picture of the mat-ters included in the points of the agenda. Authorisations given to a company’s direc-tors should be limited to one particular AGM and should, as far as possible, includethe position of the shareholder regarding each point on the agenda.

Appendix 1 Outline of the Committee’s proposal for a revision of the existingrecommendations



4. Duties of the board and rights of the shareholders in the event of takeoverbidsIn the event of attempted takeovers, it is recommended that the shareholders aregiven the opportunity to decide if they wish to surrender their shares in the companyon the conditions offered. Therefore, without the acceptance of the general meeting,or on its own, the supervisory board should refrain from countering a takeover bid byreaching decisions which in reality prevent the shareholders from deciding on thetakeover bid. The decisions which are advised against include implementing capitalincreases or allowing the company to buy its own shares based on a previouslyannounced authority for instance.

II. The role of the stakeholders and their importance to the companyIt is decisive for a company’s prosperity and future possibilities that the company hasa good relationship with its stakeholders. Stakeholders are everyone who are directlyaffected by the company’s decisions and business. Thus, it is desirable that thecompany’s management runs and develops the company with due consideration ofits stakeholders, and that the management provides an incentive for a dialogue withthese.

A successful interaction between the company and its stakeholders implies open-ness and mutual respect.

1. The company’s policies in relation to the stakeholdersIt is recommended that the supervisory board adopts a policy regarding the com-pany’s relationship with its stakeholders which, for instance, could include the com-pany’s business concept and its basic values and objectives. One element of such apolicy could be the guidelines for the company’s information about environmentaland social issues, for example.

2. The role of the stakeholders and their interestsIt is recommended that the supervisory board ensures that the interests and roles ofthe stakeholders are respected in accordance with the company’s policy regardingthis. As part of performing this, it is natural that the supervisory board ensures thatthere is an ongoing dialogue between the management and the company’sstakeholders, in order to develop and strengthen the company.

III. Openness and transparencyTo various extents it is necessary to provide shareholders, including potential share-holders and other stakeholders, with information about the company. How theyunderstand and relate to the company depends on the amount of information and thequality of the information published or provided by the company. Openness andtransparency are essential conditions for ensuring that the company’s shareholdersand other stakeholders are able to continuously evaluate and relate to the companyand its prospects, and through this, openness and transparency can contribute to aconstructive interaction with the company.

1. Information and publication of informationIt is recommended that the supervisory board adopts an information and communi-cation policy. Furthermore, it is recommended that the company develops proce-dures which ensure that the company immediately publishes all essential informationof importance for how the shareholders and the financial markets evaluate thecompany and its activities, as well as its business goals, strategies and results,unless publication can be omitted according to the legal rules of the stock exchange.The publication must be carried out in a reliable and adequate manner.

It is recommended that published information is both in Danish and in English, and ifnecessary, any other relevant languages and that it includes the use of the com-pany’s website. The company should have identical websites in Danish and Englishand any other languages if relevant.

4. Duties of the board and rights of the shareholders in the event of takeoverbidsIn the event of attempted takeovers, it is recommended that the shareholders aregiven the opportunity to decide if they wish to surrender their shares in the companyon the conditions offered. Therefore, without the acceptance of the AGM, or on itsown, the board should refrain from countering a takeover bid by reaching decisionswhich in reality prevent the shareholders from deciding on the takeover bid. Thedecisions which are advised against include implementing capital increases or allow-ing the company to buy its own shares based on a previously announced authority forinstance.

II. The role of the stakeholders and their importance to the companyIt is decisive for a company’s prosperity and future possibilities that the company hasa good relationship with its stakeholders. Stakeholders are everyone who are directlyaffected by the company’s decisions and business. Thus, it is desirable that thecompany’s management runs and develops the company with due consideration of itsstakeholders, and that the management provides an incentive for a dialogue withthese.

A successful interaction between the company and its stakeholders implies opennessand mutual respect.

1. The company’s policies in relation to the stakeholdersIt is recommended that the board adopts a policy regarding the company’s relation-ship with its stakeholders which, for instance, could include the company’s businessconcept and its basic values and objectives. One element of such a policy could bethe guidelines for the company’s information about environmental and social issues,for example.

2. The role of the stakeholders and their interestsIt is recommended that the board ensures that the interests and roles of thestakeholders are respected in accordance with the company’s policy regarding this. Aspart of performing this, it is natural that the board ensures that there is an ongoingdialogue between the management and the company’s stakeholders, in order todevelop and strengthen the company.

III. Openness and transparencyTo various extents it is necessary to provide shareholders, including potential share-holders and other stakeholders, with information about the company. How they under-stand and relate to the company depends on the amount of information and the qualityof the information published or provided by the company. Openness and transparencyare essential conditions for ensuring that the company’s shareholders and otherstakeholders are able to continuously evaluate and relate to the company and itsprospects, and through this, openness and transparency can contribute to a construc-tive interaction with the company.

1. Information and publication of informationIt is recommended that the board adopts an information and communication policy.Furthermore, it is recommended that the company develops procedures which ensurethat the company immediately publishes all essential information of importance forhow the shareholders and the financial markets evaluate the company and its activi-ties, as well as its business goals, strategies and results, unless publication can beomitted according to the legal rules of the stock exchange. The publication must becarried out in a reliable and adequate manner.

It is recommended that published information is both in Danish and in English, and ifnecessary, any other relevant languages and that it includes the use of the company’shomepage. The company should have identical homepages in Danish and Englishand any other languages if relevant.



2. Investor relationsIt is recommended that the supervisory board ensures that the continuous dialoguebetween the company and the company’s shareholders and potential shareholders ismade flexible. This can be done in the following ways:

• by holding investor meetings.• by continuously evaluating if information technology can be used to improve

investor relations, including using part of the company’s website to deal withcorporate governance related issues.

• by making all investor presentations accessible on the Internet at the sametime as they are made.

3. Annual reportThe annual report must be presented according to the relevant Danish laws. Listedcompanies shall on a consolidated basis apply the international accounting stan-dards IAS/IFRS as from 2005. Other accepted standards such as US-GAAP can beapplied as supplements, if this is relevant in connection with trade conditions or othercircumstances with regard to the information requirements of the recipients, includingcomparability facilitation.

4. Additional informationIn connection with the preparation of the annual report it is recommended that thesupervisory board decides if it is expedient that the company publishes furtherelaborating non-financial information, even in instances where this is not required bythe Danish Financial Statements Act or any other laws. Such information could beinformation about the company’s

• development and maintenance of internal knowledge resources.• ethical and social responsibilities.• health and safety policies.


IV. The tasks and responsibilities of the supervisory boardThe supervisory board is responsible for carefully safeguarding the shareholders’interests, with due consideration of the other stakeholders. As concerns the manage-rial division of tasks between the supervisory board and the executive board, thesupervisory board is assigned with, and responsible for, handling the overall man-agement of the company, as well as supervising and establishing the guidelines forthe executive board’s work. One important management task is to develop andestablish appropriate strategies for the company. It is important that the supervisoryboard ensures that there is continuous development and follow-up on the necessarystrategies in collaboration with the executive board.

1. The overall tasks and responsibilities of the supervisory boardThe supervisory board must handle the overall strategic management and the finan-cial and the managerial supervision of the company and continuously evaluate theexecutive board’s work. The supervisory board’s most essential tasks include:

• establishing the overall goals and strategies and following up on these.• ensuring clear guidelines for responsibility, distribution of responsibilities,

planning and follow-up, as well as risk management.• appointing a qualified executive board, establish the managers’ conditions of

employment, including preparing guidelines for the appointment and composi-tion of the executive board, as well as ensuring that the remuneration of theexecutives reflects the results they achieve.

• ensuring that relations to the company’s stakeholders are good and construc-tive.

2. Investor relationsIt is recommended that the board ensures that the continuous dialogue between thecompany and the company’s shareholders and potential shareholders is made flexi-ble. This can be done in the following ways:

• by holding investor meetings.• by continuously evaluating if information technology can be used to improve

investor relations, including using part of the company’s homepage to deal withcorporate governance related issues.

• by making all investor presentations accessible on the Internet at the same timeas they are made.

3. Company reportThe company report must be presented according to the relevant Danish laws, and itis recommended that the board considers applying International Accounting Stan-dards (IAS). Other accepted standards such as US-GAAP can be applied as supple-ments, if this is relevant in connection with trade conditions or other circumstanceswith regard to the information requirements of the recipients, including comparabilityfacilitation.

4. Additional informationIn connection with the preparation of the annual report it is recommended that theboard decides if it is expedient that the company publishes further elaborating non-financial information, even in instances where this is not required by the DanishCompany Accounts Act or any other laws. Such information could be informationabout the company’s

• impact on the external environment.• development and maintenance of internal knowledge resources.• ethical and social responsibilities.• health and safety policies.


IV. The tasks and responsibilities of the boardThe board is responsible for carefully safeguarding the shareholders’ interests, withdue consideration of the other stakeholders. As concerns the managerial division oftasks between the board and the management, the board is assigned with, andresponsible for, handling the overall management of the company, as well as super-vising and establishing the guidelines for the management’s work. One importantmanagement task is to develop and establish appropriate strategies for the company.It is important that the board ensures that there is continuous development and follow-up on the necessary strategies in collaboration with the management.

1. The overall tasks and responsibilities of the boardThe board must handle the overall strategic management and the financial and themanagerial supervision of the company and continuously evaluate the management’swork. The board’s most essential tasks include:

• establishing the overall goals and strategies and following up on these.• ensuring clear guidelines for responsibility, distribution of responsibilities, plan-

ning and follow-up, as well as risk management.• appointing a qualified management, establish the managers’ conditions of

employment, including preparing guidelines for the appointment and composi-tion of the management, as well as ensuring that the remuneration of the man-agers reflects the results they achieve.

• ensuring that relations to the company’s stakeholders are good and construc-tive.



2. The chairman’s tasksThe chairman is especially responsible for ensuring that the supervisory boardfunctions satisfactorily and that the tasks of the supervisory board are handled in thebest possible way. In this connection, it is recommended that the chairman ensuresthat the individual member of the supervisory board’s particular knowledge andcompetence are used as best as possible in the supervisory board work for thebenefit of the company. The supervisory board’s frequency of meeting is planned insuch a way that the supervisory board acts as an active sparring partner to theexecutive board and is able to react quickly and efficiently at all times.

It is recommended that the company appoints a deputy chairman. The deputy chair-man must be able to act in the chairman’s absence and in addition be an efficientsparring partner to the chairman. The chairman should try to ensure that the board’snegotiations take place when all the members of the supervisory board are presentand that all essential decisions are made when all the members of the supervisoryboard are present.

It is recommended that the company prepares a work and task description containinga description of the tasks, duties and responsibilities of the chairman, and the deputychairman, if required.

3. ProceduresIt is essential that the procedures of the supervisory board are an efficient andfunctional tool for solving the supervisory board’s tasks. It is recommended that theprocedures are always adjusted to the requirements of the individual company, andthat all the members of the supervisory board review the procedures with regard toensuring this at least once a year.

4. Information from the executive board to the supervisory boardIt is recommended that the supervisory board establish procedures for how theexecutive board reports to the supervisory board and for any other communicationbetween the supervisory board and the executive board. This will ensure that thesupervisory board is provided with the information about the company’s businesswhich the supervisory board requires on a continuous basis. In all circumstances theexecutive board must ensure that the supervisory board is provided with essentialinformation, whether the supervisory board has requested it or not.

V. Composition of the supervisory boardIt is essential that the supervisory board is composed in a such a manner that it iscapable of handling its managerial tasks, including the strategic tasks of the com-pany in a efficient and forward looking manner, and that it acts as a constructive andqualified sparring partner for the executive board at the same time. It is also essentialthat the members of the supervisory board always act independently of specialinterests. The supervisory board must continuously ensure that its composition andits procedures reflect the demands posed by the company’s current situation andcircumstances.

1. Recruitment and election of members of the supervisory boardIt is recommended that the supervisory board ensures that the candidates for thesupervisory board, who are nominated by the supervisory board, have the relevantand necessary knowledge and professional experience in relation to the require-ments of the company, including the necessary international background and experi-ence if this is relevant. The supervisory board should ensure a formal, thorough andtransparent nomination process. Moreover, the supervisory board should ensure thata given board composition as a whole will provide the supervisory board with theskills that are necessary for the supervisory board to be able to perform its tasks inthe best possible way.

2. The chairman’s tasksThe chairman is especially responsible for ensuring that the board functions satisfac-torily and that the tasks of the board are handled in the best possible way. In thisconnection, it is recommended that the chairman ensures that the individual director’sparticular knowledge and competence are used as best as possible in the board workfor the benefit of the company. The board’s frequency of meeting is planned in such away that the board acts as an active sparring partner to the management and is ableto react quickly and efficiently at all times.

It is recommended that the company appoints a deputy chairman. The deputy chair-man must be able to act in the chairman’s absence and in addition be an efficientsparring partner to the chairman. The chairman should try to ensure that the board’snegotiations take place when all the directors are present and that all essential deci-sions are made when all the directors are present.

It is recommended that the company prepares a work and task description containinga description of the tasks, duties and responsibilities of the chairman, and the deputychairman, if required.

3. ProceduresIt is essential that the procedures of the board are an efficient and functional tool forsolving the board’s tasks. It is recommended that the procedures are always adjustedto the requirements of the individual company, and that all the directors review theprocedures with regard to ensuring this at least once a year.

4. Information from the management to the boardIt is recommended that the board establish procedures for how the managementreports to the board and for any other communication between the board and themanagement. This will ensure that the board is provided with the information about thecompany’s business which the board requires on a continuous basis. In all circum-stances the management must ensure that the board is provided with essential infor-mation, whether the board has requested it or not.

V. Composition of the boardIt is essential that the board is composed in a such a manner that it is capable ofhandling its managerial tasks, including the strategic tasks of the company in a effi-cient and forward looking manner, and that it acts as a constructive and qualifiedsparring partner for the management at the same time. It is also essential that thedirectors always act independently of special interests. The board must continuouslyensure that its composition and its procedures reflect the demands posed by thecompany’s current situation and circumstances.

1.Recruitment and election of directorsIt is recommended that the directors ensure that the candidates for the board, who arenominated by the directors, have the relevant and necessary knowledge and profes-sional experience in relation to the requirements of the company, including the neces-sary international background and experience if this is relevant. When nominating theindividual candidates, the directors should ensure that a given board composition as awhole will provide the board with the skills that are necessary for the board to be ableto perform its tasks in the best possible way.



It is recommended that the supervisory board encloses a description of the nomi-nated candidates’ background in the notice of the general meeting when the electionof the members of the supervisory board is on the agenda. At the same time, thesupervisory board should state the recruitment criteria which the supervisory boardhas established, including the requirements of professional qualifications, interna-tional experience etc. which, in the opinion of the supervisory board, representessential qualities with regard to the supervisory board. The owners of the companyshould be given an opportunity to discuss these criteria. Also, other executive func-tions of the candidates in other Danish or foreign companies and organisationsshould be disclosed.

2. Training and introduction for members of the supervisory boardWhen new members of the supervisory board join the supervisory board it is recom-mended that they are given an introduction to the company and that the chairman, incollaboration with the individual supervisory board member, decides if it is necessaryto offer the member in question any relevant, supplementary training. The training,which can also be offered continuously, should be adjusted to the individual supervi-sory board member’s needs and should ensure that each of the members of thesupervisory board are capable of:

• taking part in a qualified dialogue with the executive board about the com-pany’s strategic development and prospects.

• acquiring and keeping an overview of the company’s core areas, activities andthe conditions of the industry in question.

• actively participating in the supervisory board work.

In addition, the members of the supervisory board are solely responsible for activelyobtaining knowledge and continuously keeping themselves posted about the condi-tions of the company and the industry in question.

3. The number of supervisory board membersIt is important that the supervisory board has a size which allows for a constructivedebate and an efficient decision process, in which it is possible for all the members ofthe supervisory board to play an active part. Against this background it is recom-mended that the supervisory board consists of no more than six members elected bythe general meeting. The supervisory board must consider if the number of supervi-sory board members is appropriate in relation to the requirements of the company onan on-going basis.

4. The supervisory board’s independenceIt is important that the supervisory board is composed in such a way that its memberscan act independently of special interests. Therefore, it is recommended that themajority of the members of the supervisory board elected by the general meeting areindependent. In this context an independent supervisory board member elected bythe general meeting cannot:

• be an employee in the company or be someone who has been employed in thecompany in the past five years.

• have been a member of the executive board of the company.• be a professional consultant to the company or be employed by, or have a

financial interest in, a company which is a professional consultant to the com-pany.

• have some other essential strategic interest in the company other than that ofa shareholder.

We cannot recommend that members of the executive board of a company are alsomembers of the supervisory board of the company. This also applies to situation inwhich major shareholders are executives of a company as well as supervisory boardmembers at the same time. In companies with one major shareholder, the supervi-sory board should pay special attention to the safeguarding of the other sharehold-ers’ interests on equal terms with the major shareholder’s interests at all times.

It is recommended that the board enclose a description of the nominated candidates’background in the notice of the AGM when the election of the directors is on theagenda. At the same time, the board should state the recruitment criteria which theboard has established, including the requirements of professional qualifications,international experience etc. which, in the opinion of the board, represent essentialqualities with regard to the board.

2. Training and introduction for directorsWhen directors join the board it is recommended that they are given an introduction tothe company and that the chairman, in collaboration with the individual director,decides if it is necessary to offer the director in question any relevant, supplementarytraining. The training, which can also be offered continuously, should be adjusted tothe individual director’s needs and should ensure that each of the directors are capa-ble of:

• taking part in a qualified dialogue with the management about the company’sstrategic development and prospects.

• acquiring and keeping an overview of the company’s core areas, activities andthe conditions of the industry in question.

• actively participating in the board work.

In addition, the directors are solely responsible for actively obtaining knowledge andcontinuously keeping themselves posted about the conditions of the company and theindustry in question.

3. The number of directorsIt is important that the board has a size which allows for a constructive debate and anefficient decision process, in which it is possible for all the directors to play an activepart. Against this background it is recommended that the board consists of no morethan six directors elected by the general meeting. The board must consider if thenumber of directors is appropriate in relation to the requirements of the company onan on-going basis.

4. The board’s independenceIt is important that the board is composed in such a way that its directors can actindependently of special interests. Therefore, it is recommended that the majority ofthe directors elected by the general meeting are independent. In this context anindependent director elected by the general meeting cannot:

• be an employee in the company or be someone who has been employed in thecompany in the past five years.

• have been a member of the management of the company.• be a professional consultant to the company or be employed by, or have a

financial interest in, a company which is a professional consultant to the com-pany.

• have some other essential strategic interest in the company other than that of ashareholder.

We cannot recommend that managers of a company are also directors of the com-pany. This also applies to situation in which major shareholders are managers of acompany as well as directors at the same time. In companies with one major share-holder, the board should pay special attention to the safeguarding of the other share-holders’ interests on equal terms with the major shareholder’s interests at all times.



is recommended that the annual report contains the following information about thesupervisory board members elected by the general meeting:

• the supervisory board member’s occupation.• the supervisory board member’s other managerial positions or directorships in

Danish as well as foreign companies and organisations.• how many shares, options and warrants the supervisory board member owns

in the company and in affiliated companies and the changes in the supervisoryboard member’s portfolio of the mentioned securities which have taken placeduring the accounting year.

5. Staff-elected members of the supervisory boardSupervisory board members elected by the staff have the same rights, obligationsand duties as the supervisory board members elected by the general meeting. Byvirtue of their employment by the company they are not independent. It is recom-mended that each company considers the need to explain the system regardingstaff-elected members of the supervisory board in the annual report, on the com-pany’s website or otherwise, which will particularly be relevant to ensure foreigninvestors’ understanding of the importance and function of such system.

6. Meeting frequencyIt is recommended that the supervisory board meets regularly according to a pre-prepared meeting and work schedule and when a meeting seems necessary orappropriate in the light of the company’s requirements. The annual meeting fre-quency should be published in the annual report.

7. Time allocated to supervisory board work and the number of supervisoryboard seatsIt is important that the individual member of the supervisory board understands whattime requirements the supervisory board work places on him in advance and that heallocates sufficient time for his tasks on the supervisory board. It is recommendedthat a supervisory board member who is also a member of the executive team of anactive company does not hold more than three ordinary supervisory board seats orone chairmanship and one ordinary supervisory board seat in companies which arenot part of the group, except in exceptional circumstances.

8. Retirement ageThe annual report should contain information about the age of the individual mem-bers of the supervisory board. It is recommended that the company fixes a retirementage for members of the supervisory board.

9. Election periodIt is recommended that members of the supervisory board are up for (re)electioneach year at the general meeting.Continuity should be maintained through the replacement of the supervisory board.The annual report should state when the member of the supervisory board joined theboard, if the member of the supervisory board has been reelected and when the newelection period expires. It is recommended that the company fixes a period afterwhich the chairman and the other members of the supervisory board no longer canbe elected or reelected.

If a supervisory board member’s conditions of employment change during an electionperiod he should inform the other members of the supervisory board of this and beprepared to make his mandate available at the next general meeting.

It is recommended that the annual report contains the following information about thedirectors elected by the general meeting:

• the director’s occupation.• the director’s other managerial positions or directorships in Danish as well as

foreign companies.• how many shares, options and warrants the director owns in the company and in

affiliated companies and the changes in the director’s portfolio of the mentionedsecurities which have taken place during the accounting year.

5. Meeting frequencyIt is recommended that the board meets regularly according to a pre-prepared meetingand work schedule and when a meeting seems necessary or appropriate in the light ofthe company’s requirements. However, it is recommended that the board holds atleast five ordinary meetings a year. The annual meeting frequency should be pub-lished in the annual report.

6. Time allocated to board work and the number of directorshipsIt is important that the individual director understands what time requirements theboard work places on him in advance and that he allocates sufficient time for his taskson the board. It is recommended that a director who is also a member of the man-agement team of an active company does not fill more than three ordinary director-ships or one chairmanship and one ordinary directorship in companies which are notpart of the group, except in exceptional circumstances.

7. Retirement ageThe annual report should contain information about the age of the individual directors.It is recommended that directors retire from the board in the year they turn 70 at thelatest.

8. Election periodIt is recommended that directors are elected to the board for a period of no more thanthree years at a time and that the board organises the election periods for the individ-ual directors elected by general meeting in such a way that continuity is maintainedthrough the replacement of the board. The annual report should state when the direc-tor joined the board, if the director has been reelected and when the new electionperiod expires. Reelection of the chairman and the other directors for a period of morethan nine years cannot be recommended.

If a director’s conditions of employment change during an election period he shouldinform the other directors of this and be prepared to make his mandate available atthe next AGM.



10. Use of board committeesWhether a board committee should be established depends on the specific condi-tions of each company, including the size and modus operandi of the supervisoryboard and the size and complexity of the company. If the supervisory board appointsa committee, this should only be done in connection with matters regarding limitedsubjects in order to prepare decisions that must be reached by all of the members ofthe supervisory board. It is important that the supervisory board ensures that theappointment of a board committee does not result in important information directed atall members of the supervisory board only reaching the board committee. The super-visory board must disclose whether it has chosen to use board committees in theannual report and, if so, the reason why. Moreover, the company may benefit fromdisclosing essential items of the rules of procedure of the board committee as well asthe names of the members.

11. Self-assessment of the supervisory board’s workWe recommend that the supervisory board establishes an assessment processwhich continuously and systematically evaluates the work, results and composition ofthe supervisory board and the individual board members, including the chairman, inorder to improve the supervisory board’s work. In this connection, the criteria of theevaluation should be clearly specified. When assessing the supervisory board as awhole, there is a clear need to evaluate to what extent previously established strate-gic goals and plans have been realised. It will be appropriate to carry out the as-sessment once a year and the chairman will be responsible for this, and if necessary,with external help. The result will be discussed by the entire supervisory board.Furthermore, it is recommended that the supervisory board states the procedures ofthe supervisory board’s self-assessment in the annual report.

12. Assessment of the executive board’s workIt is recommended that the supervisory board evaluates the executive board’s workand results according to already established explicit criteria once a year.

13. Assessment of the collaboration between the supervisory board and theexecutive boardIt is recommended that the executive board and the supervisory board establish aprocedure by which the collaboration between the supervisory board and the execu-tive board is assessed in an annual meeting between the CEO and the chairman ofthe supervisory board. The result of the assessment should be presented to theentire supervisory board.

VI. Remuneration to the members of the supervisory board and the executiveboardA competitive remuneration is a prerequisite for attracting and keeping competentsupervisory board members and executives. The remuneration to the supervisoryboard members and the executives should be reasonable in connection with theassigned tasks and the responsibilities which are connected with solving these tasks.

Performance-related pay may result in conflicting interests between the shareholdersand the executives, and may lead to the executives focusing on increasing the valuecreation of the company.

It is important that there is openness about all important issues regarding the princi-ples and size of the total remuneration to the members of the supervisory board andthe executive board.

1. RemunerationIt is recommended that the total remuneration (basic pay, bonus, price-related incen-tive schemes, pension, severance pay and other benefits) is at a competitive and fairlevel and reflects the executives’ and supervisory board members’ independentachievements and value creation in the company.

9. Use of board committeesMost company boards are not so large that they require the establishment of boardcommittees in order to be able to manage their tasks, and therefore appointments ofboard committees cannot be recommended in general. However, if the board is verylarge, or in the event of other specific circumstances, the board must consider if it isnecessary to establish board committees. As a rule, if the board appoints a committee,this should only be done in order to prepare decisions that must be reached by all ofthe directors. It is important that the board ensures that the appointment of a boardcommittee does not result in important information directed at all directors only reach-ing the board committee. The board must account for why it has chosen to use boardcommittees in the annual report.

10. Self-assessment of the board’s workWe recommend that the board establishes an assessment process which continuouslyand systematically evaluates the work, results and composition of the board and theindividual directors, including the chairman, in order to improve the board’s work. Inthis connection, the criteria of the evaluation should be clearly specified. When as-sessing the board as a whole, there is a clear need to evaluate to what extent previ-ously established strategic goals and plans have been realised. It will be appropriateto carry out the assessment once a year and the chairman will be responsible for this,and if necessary, with external help. The result will be discussed by the entire board.Furthermore, it is recommended that the board states the procedures of the board’sself-assessment in the annual report.

11. Assessment of the management’s workIt is recommended that the board evaluates the management’s work and resultsaccording to already established explicit criteria once a year.

12. Assessment of the collaboration between the board and the managementIt is recommended that the management and the board establish a procedure bywhich the collaboration between the board and the management is assessed in anannual meeting between the managing director and the chairman of the board. Theresult of the assessment should be presented to the entire board.

VI. Remuneration to the directors and the managersA competitive remuneration is a prerequisite for attracting and keeping competentdirectors and managers. The remuneration to the directors and the managers shouldbe reasonable in connection with the assigned tasks and the responsibilities which areconnected with solving these tasks.Performance-related pay may result in conflicting interests between the shareholdersand the managers, and may lead to the managers focusing on increasing the valuecreation of the company. It is important that there is openness about all importantissues regarding incentive schemes.



2. Openness about remunerationIt is recommended that the annual report contains information on the principles andsize of the total remuneration to the members of the supervisory board and theexecutive board.

3. Principles of establishing incentive schemesThe supervisory board establishes the principles and the guidelines for the prepara-tion of any incentive schemes for the company’s executives and supervisory boardmembers, and concerning the latter, with regard to their acceptance at the generalmeeting. It is recommended that the total remuneration is competitive and reason-able and that it reflects how the executives and supervisory board members haveperformed independently, as well as how much value they have created for thecompany. Likewise, incentive schemes should reflect the interests of the sharehold-ers and the company, be adjusted to the company’s specific circumstances and bereasonable in relation to the tasks and the responsibilities of the executives andsupervisory board members.

The remuneration for the members of the supervisory board may consist of incentiveschemes, including bonus schemes and shares at market price, but we cannotrecommend that it consists of share option schemes.

If the remuneration for the executives consists of share or subscription options, werecommend that the schemes are set up as roll-over schemes (i.e. the options areallocated and expire over a number of years) and that the redemption price is higherthan the market price at the time of the allocation. Moreover, the schemes should beset up in a way that promotes long-term behaviour and they should be transparent,as well as clearly understandable to outsiders. Valuation should be made accordingto generally accepted methods.

4. Openness and transparency regarding performance-related pay based onsharesWe recommend that all important issues regarding performance-related pay basedon shares are published in the company’s annual report, including who receives itand what the total for the executives and the supervisory board members amountsto. Likewise, information about the incentive remuneration based on shares to theindividual member of the supervisory board or executive should also be published inthe company’s annual report.

5. Severance schemes for the members of the executive boardIt is recommended that the most important contents of the severance schemes shallbe disclosed in the company’s annual report.

1. Principles of establishing incentive schemesThe board establishes the principles and the guidelines for the preparation of anyincentive schemes for the company’s managers and directors, and concerning thelatter, with regard to their acceptance at the AGM. It is recommended that the totalremuneration is competitive and reasonable and that it reflects how the managers andthe directors have performed independently, as well as how much value they havecreated for the company. Likewise, incentive schemes should reflect the interests ofthe shareholders and the company, be adjusted to the company’s specific circum-stances and be reasonable in relation to the tasks and the responsibilities of themanagers and the directors.

The remuneration for the directors may consist of incentive schemes, including bonusschemes and shares at market price, but we cannot recommend that it consists ofshare option schemes.

If the remuneration for the managers consists of share or subscription options, werecommend that the schemes are set up as roll-over schemes (i.e. the options areallocated and expire over a number of years) and that the redemption price is higherthan the market price at the time of the allocation. Moreover, the schemes should beset up in a way that promotes long-term behaviour and they should be transparent, aswell as clearly understandable to outsiders.

2. Openness and transparency regarding performance-related pay based onsharesWe recommend that all important issues regarding performance-related pay based onshares are published in the company’s annual report, including who receives it andwhat the total for the managers and the directors amounts to. Likewise, informationabout the incentive remuneration based on shares to the individual director or man-ager should also be published in the company’s annual report.

3. Redundancy schemes for the managersIt is recommended that any redundancy schemes for a manager be reasonable andreflect the results the individual manager has achieved, the cause of the resignationand the manager’s responsibilities, as well as the remuneration which the manager inquestion has received. Information about the most important contents of the redun-dancy scheme should be published in the company’s annual report.



VII. Risk managementEfficient risk management is a prerequisite for the supervisory board being able toperform the tasks for which it is responsible in the best possible way. Thus it isimportant that the supervisory board ensures that there are appropriate systems forrisk management in place and, moreover, ensures that such systems meet therequirements of the company at any time.

The purpose of risk management is:

• to develop and maintain an understanding within the organisation of the com-pany’s strategic and operational goals, including identification of the criticalsuccess factors for achieving goals.

• to analyse the possibilities and challenges which are connected with the reali-sation of the above goals and to analyse the risk of these goals not being met.

• to analyse the most important activities of the company in order to identify therisks attached hereto.

• to determine the venture spirit of the company.

1. Identification of risksWhen formulating the company’s strategy and overall goals, it is recommended thatthe supervisory board and executive board identify the greatest business risksinvolved in the realisation hereof.

2. Plan for risk managementIt is recommended that the executive board on the basis of the identified risks pre-pares a plan for the company’s risk management and submits it for supervisory boardapproval. The executive board should currently report to the supervisory board sothat the supervisory board can systematically follow the development in significantrisk areas. The report may, among other things, contain procedures and action plansthat can eliminate, reduce, divide or accept these risks.

3. OpennessIt is recommended that the company’s annual report contains information about thecompany’s risk management activities.

VII. Risk managementEfficient risk management is a prerequisite for the board being able to perform thetasks for which it is responsible in the best possible way. Thus it is important that theboard ensures that there are appropriate systems for risk management in place and,moreover, ensures that such systems meet the requirements of the company at anytime.

1. Risk managementThe purpose of risk management is:

• to develop and maintain an understanding within the organisation of the com-pany’s strategic and operational goals, including identification of the critical suc-cess factors.

• to analyse these possibilities and challenges which are connected with therealisation of the above goals and to analyse the risk of these goals not beingmet.

• to analyse the most important activities of the company in order to identify therisks attached hereto.

Risk management also focuses on procedures for damage control, the formation ofcontracts, safety at work, environmental issues and safeguarding physical values. It isrecommended that the board ensures that the management establish efficient riskmanagement systems and that the board continuously follows up on these in order toensure that they always work efficiently in the light of the company’s requirements. Asrequired, but at least once a year, the board should evaluate the company’s riskmanagement and by establishing the risk policy, decide on the company’s risk-takingincluding insurance, currency and investment policies.

The risk management system must define the risk and describe how this risk is elimi-nated, controlled or hedged on a continuous basis.

In that connection the board should consider how any collaboration with the com-pany’s external audit could contribute to the risk management, and to what extent theinternal audit could be part of the risk management.



VIII. AuditEnsuring a competent and independent audit is an essential element of the supervi-sory board’s work. It is recommended that the contractual basis and thus the frame-work of the auditor’s work is determined by the supervisory board.

1. The supervisory board’s nomination of auditor-candidateThe supervisory board should in consultation with the executive board make aspecific and critical assessment of the auditor’s independence and competence, etcto be used in connection with the presentation of the nomination at the generalmeeting.

2. The agreement with the auditorThe auditor agreement and the auditor’s fee should be agreed between the com-pany’s supervisory board and the auditor.

3. Non-auditor servicesThe supervisory board should adopt an overall, general framework for the auditor’sprovision of non-auditor services with a view to ensuring the auditor’s independence,etc.

4. Internal control systemsThe supervisory board should at least once a year review and assess the internalcontrol systems within the company as well as the management’s guidelines for andmonitoring of such systems.

5. Accounting policies and accounting estimatesWhen the supervisory board reviews the annual report (or a draft of the annualreport) together with the auditor the accounting policies and accounting estimatesshould be discussed. The expediency of the chosen accounting policies should beconsidered.

6. Result of the auditThe result of the audit should be discussed at meetings with the supervisory board inorder to review the auditor’s observations and opinion, possibly based on a draft ofthe long-form audit report.

7. Audit committeeIn companies with complex accounting and audit conditions the supervisory boardshould consider establishing an audit committee to assist the board in matters ofaccounting and audit questions.


Country /Organisation

Name (Head)sponsor Year of publication /last amended

Australia Principles of Good Corporate Governance andBest Practice Recommendations

ASX Corporate Governance Council March 2003

Belgium Corporate Governance for Belgian listed compa-nies

Belgian Corporate Governance Commission (aninitiative of the Brussels Stock Exchange) and theCommission Bancaire et Financière

December 1998

Brazil Recomendações sobre Governança Corporativa Comissão de Valores Mobiliários (CVM) June 2002Canada Proposed New Disclosure Requirement and

Amended Guidelines (draft)Toronto Stock Exchange March 2002

Commonwealth Principles of Best Business Practice for theCommonwealth

Commonwealth Association for Corporate Gov-ernance (CACG)

November 1999

Cypress Corporate Governance Code Cyprus Stock Exchange March 2003Finland Corporate Governance Recommendation for

listed ComapniesHEX, the Central Chamber of Commerce ofFinland and the Confederation of Finnish Industryand Employers

December 2003

France The Corporate Governance of Listed Corpora-tions: Principles for Corporate Governance basedon consolidation of the1995, 1999 and 2002AFEP and MEDEF’s reports

Association Française des Entreprises Privées(AFEP) and MEDEF (French Business Confed-eration)

October 2003

Greece Principles of Corporate Governance Federation of Greek Industries July 2001Holland Draft Corporate Governance Code Corporate Governance Committee chaired by Mr

Morris TabaksblatJuly 2003

Hong Kong Model Code for Securities Transactions by Di-rectors of Listed Companies: Basic Principles

Hong Kong Stock Exchange Listing Require-ments, Appendix 10

June 2001

India Report of the Kumar Mangalam Birla Committeeon Corporate Governance

Committee Appointed by the Securities andExchange Board of India (SEBI) on CorporateGovernance under the Chairmanship of ShriKumar Mangalam Birla

February 2000

Indonesia Code for Good Corporate Governance The National Committee on Corporate Govern-ance

March 2001

Ireland Corporate Governance, Share Option and OtherIncentive Schemes

Irish Association of Investment Managers March 1999

Italy Corporate Governance Code (il Codice di Auto-disciplina delle società quotate rivisitato)

Committee for the Corporate Governance ofListed Companies, Borsa Italiana

July 2002

Japan Revised Corporate Governance Principles Japan Corporate Governance Forum October 2001Kenya Principles for Corporate Governance in Kenya Private Sector Initiative for Corporate GovernanceKorea Code of Best Practice for Corporate Governance Committee on Corporate Governance September 1999Macedonia White Paper on Corporate Governance in South-

Eastern Europe (Macedonian Version)Macedonia Corporate Governance and CompanyLaw Project

July 2003

Malaysia Malaysian Code on Corporate Governance Securities Commission Malaysia March 2000Malta Principles of Good Corporate Governance Malta Stock Exchange October 2001Mexico Códigode Mejores Prácticas Corporativas Mexican Stock Exchange, the Mexican Bankers'

Association, the Mexican Institute of FinanceExecutives and the Mexican Institute of PublicAccountants

July 1999

Appendix 2 Outline of existing codes of Conduct


Norway Corporate Governance Recommendations Aksjonærforeningen i Norge, Eierforum, Finans-nærings Hovedorganisasjon, Norske Finansana-lytikeres Forening, Næringslivets Hovedor-ganisasjon, Norske Pensjonskassers Forening,Oslo Børs, Verdipapirfondenes Forening

December 2003

OECD OECD Principles of Corporate Governance Organisation for Economic Co-operation andDevelopment

May 1999

Pakistan Code of Corporate Governance (Revised The Securities and Exchange Commission ofPakistan

March 2002

Peru Principios de Buen Gobierno para las SociedadesPeruanas

Comisió Nacional Supervisora de Empresas yValores (“CONASEV”)

July 2002

Poland Best Practices in Public Companies in 2002 The Best Practices Committee at CorporateGovernance Forum

July 2002

Portugal Recommendations on Corporate Governance Comissão do Mercado de ValoresMobiliários November 1999Romania Corporate Governance Code in RomaniaRussia The Russian Code of Corporate Conduct The Co-ordination Council for Corporate Govern-

anceApril 2002

Switzerland Corporate Governance: Swiss Code of BestPractice

Swiss Business Federation July 2002

Singapore Code of Corporate Governance Corporate Governance Committee, Council onCorporate Disclosure and Governance (CCDG)

March 2001

Slovakia Corporate Governance Code (Based on theOECD Principles)

Bratislava Stock Exchange (Prepared with theassistance of The British-Slovak Action Plan &DFID)

September 2002

Spain The Aldama report - Informe de la ComisiónEspecial para el Fomento de la Transparencia ySeguridad en los Mercados y en las SociedadesCotizadas

January 2003

Sweden Corporate Governance Policy – guidelines forbetter control and transparency for owners ofcompanies quoted on the Swedish stockmarket

Sveriges Aktiesparares Riksförbund (The Swed-ish Shareholders' Association)

October 2001

South Africa King Report on Corporate Governance for SouthAfrica - 2002 (King II Report)

Institute of Directors in Southern Africa March 2002

Czech Republic Revised Corporate Governance Code (Based onthe OECD Principles)

Czech Securities Commission February 2001

Turkey Corporate Governance Principles The Capital Markets Board of Turkey July 2003Germany Amendments to the Cromme Code Government Commission German Corporate

Governance CodeMay 2003

UK The Combined Code on Corporate Governance The Financial Reporting Council (FRC) July 2003Austria Österreichischer Corporate Governance Kodex

(Austrian Code of Corporate Governance)Österreichischer Arbeitskreis für CorporateGovernance

September 2002

Source: www.ecgi.orgThe codes of conduct of Norway and Finland are not included on www.ecgi.org at present.

Copenhagen Stock ExchangeNikolaj Plads 6P.O. Box 1040DK-1007 Copenhagen K

Phone +45 33 93 33 66Fax +45 33 12 86 [email protected]

Documents

Report on Corporate Governance in Denmark